Property ValuationIntermediateArizona Exam

A 'drive-by' appraisal (exterior-only inspection) is typically used for:

AInitial purchase loan transactions requiring detailed interior inspection, since Fannie Mae guidelines require full interior appraisals for all purchase money mortgages

BRefinance transactions where the lender has a prior interior appraisal and needs a lower-cost updateCorrect

CAll FHA-insured loans regardless of transaction type, since FHA's minimum property requirements mandate a full interior inspection by the FHA-approved appraiser

DProperties with known or suspected interior defects, since lenders order exterior-only appraisals when the physical condition inside the property is uncertain

Why Refinance transactions where the lender has a prior interior appraisal and needs a lower-cost update Is Correct

Answer B: Refinance transactions where the lender has a prior interior appraisal and needs a lower-cost update

Exterior-only (drive-by) appraisals are used for lower-risk transactions like refinances where an interior appraisal is not deemed necessary. They are less comprehensive and rely on public data and exterior observation.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

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Key Terms to Know

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Short Sale

A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.

Debt-to-Income Ratio (DTI)

A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.

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