PSI New Jersey Real Estate State Practice Exam

When is an appraisal by a certified appraiser required in a real estate transaction?

1. When the buyer pays cash

2. When the buyer is using an FHA loan to purchase

3. When the buyer is a first-time homebuyer

4. In all real estate transactions

The correct answer is: When the buyer is using an FHA loan to purchase

An appraisal by a certified appraiser is required when the buyer is using an FHA loan to purchase a property. This is because FHA loans are federally backed, and they have strict guidelines to ensure that the property meets certain standards for safety and value. The appraisal serves as a way to protect both the lender and the buyer by ensuring that the property is worth the amount being financed and meets the necessary quality and safety standards. While appraisals can be beneficial in various situations, such as for buyers paying cash or first-time homebuyers, they are not strictly required in those cases. For buyers paying cash, for example, there is no lender involved who might demand an appraisal; thus, it becomes a negotiable aspect of the transaction. Similarly, while first-time homebuyers may benefit from an appraisal, it is not a necessity unless financing methods or lender requirements specifically dictate so. In the context of the question, the requirement is specifically linked to FHA loans, making this the correct answer.