Real Estate Appraisal Practice Exam

In relation to appraisals, what's a "federally related transaction"?

1. A transaction involving private financing

2. A real estate transaction in which a federal financial agency or regulatory authority is involved

3. A transaction solely between two individuals

4. A transaction requiring state approval

The correct answer is: A real estate transaction in which a federal financial agency or regulatory authority is involved

A "federally related transaction" in the context of appraisals refers to a real estate transaction that involves a federal financial agency or regulatory authority. This encompasses transactions where a property is supported or influenced by federal funds, such as loans or grants provided by federal entities like banks, credit unions, or government-sponsored enterprises. The significance of this definition lies in the regulatory framework it establishes, as federally related transactions must adhere to specific appraisal standards mandated by federal law. These standards are designed to ensure that appraisals are conducted fairly and consistently, protecting both the integrity of real estate transactions and the interests of both lenders and borrowers. Other options, such as transactions involving private financing or those solely between two individuals, do not fit the definition because they do not involve federal agencies or regulatory authorities. Similarly, while some transactions might require state approval, this does not inherently relate to the federal aspect that characterizes a federally related transaction.