CMCP Chapter 6 Inspection and Appraisal Test Questions and Correct Answers

Inspection deals with the condition of a home, whereas an appraisal deals with the value of a home. The most common collateral is real estate property. Inspections and/or appraisal of real estate property are conducted by the bank through its credit investigators and appraisers whose main tasks revolve around inspection of property and its evaluation and appraisal where credit is requested by a prospective borrower from the bank. Nature of Property Inspection and Appraisal An inspection will allow the buyer to weigh up the pros and cons of investing in a certain property, while an appraisal will enable the seller to establish the value of a property. Purpose of Property Inspection and Appraisal The value most commonly sought in an appraisal. Market Value The amount that an insurance company will pay out if an asset that it has insured is deemed a constructive or actual total loss. Insurable Value The value that assumes the company will remain in business indefinitely and continue to be profitable. It is an assumption that a company or property is expected to continue operating well into the future (usually indefinitely). Going concern Value The value of the assets that remain if the company goes out of business and is no more a going concern. Liquidation Value The value of a residence for tax purposes and takes comparable home sales and inspections into consideration. It is the price placed on a home by the corresponding government municipality to calculate property taxes. Price and assessed Value 1. It Provides an "out" 2. Safety 3. Reveal Illegal Additions or Installations 4. Protection 5. Negotiating Tool 6. Forecast Future Cost 7. Determine "Deal-Breakers" 8. Learn to protect your investment 9. Reveal the Big Picture 10. Insurance Functions/Objectives of Property Inspection