A client engages an appraiser to evaluate the quality of another appraiser's report. Standard 3 governs:
Correct Answer
B) The development of an appraisal review
Why this is correct: Standard 3 governs the development of an appraisal review, which is the act or process of developing an opinion about the quality of another appraiser's work. The review itself must be developed competently and credibly. Why the other choices are wrong: 'The reporting of a mass appraisal' is wrong because that is governed by Standard 6. 'The valuation of personal property and related assets' is wrong because that is governed by Standards 7 and 8. 'The retention period for workfiles' is wrong because that is governed by the Record Keeping Rule, not a Standard. Exam tip: Standard 3 = Development of a review. Standard 4 = Reporting of a review.
Why This Is the Correct Answer
Evaluating the quality of another appraiser's report is the definition of an appraisal review, and the development of a review is governed by Standard 3. That standard requires the reviewer to identify the client and intended users, the intended use, the purpose, the work under review and its effective date, and the scope of work, and then to develop an opinion about the completeness, accuracy, adequacy, relevance, and reasonableness of the work reviewed. If the reviewer also develops his own opinion of value, additional development requirements attach. Communicating that review opinion then falls under Standard 4.
Why the Other Options Are Wrong
Option A: The reporting of a mass appraisal
Mass appraisal reporting sits in Standard 6, with mass appraisal development in Standard 5. Mass appraisal is the valuation of a universe of properties using common data and statistical testing, typically for ad valorem taxation, which is a different activity from judging one appraiser's work. The option is a plausible distractor only because both involve a numbered standard the average candidate rarely reads.
Option C: The valuation of personal property and related assets
Personal property appraisal development and reporting are Standards 7 and 8. Personal property means identifiable tangible objects other than real estate, such as machinery, art, and equipment, and the standards address different competency and market issues. Nothing about reviewing another appraiser's real property report touches that pair.
Option D: The retention period for workfiles
Workfile content and retention are governed by the Record Keeping Rule, not by any Standard, and the retention period is at least five years after preparation or at least two years after final disposition of any judicial proceeding in which the appraiser testified, whichever is longer. Rules apply across all assignment types, which is precisely why record keeping lives outside the numbered Standards. Mixing up Rules and Standards is the underlying error here.
Odd Develops, Even Reports
Count the pairs: 1 and 2 real property, 3 and 4 review, 5 and 6 mass appraisal, 7 and 8 personal property, 9 and 10 business. The odd number always develops and the even number always reports. Five pairs, one pattern.
How to use: Identify the activity in the stem, find its pair, then decide whether the stem describes doing the work or writing it up. Develop, analyze, and form an opinion point to the odd standard; report, communicate, and disclose point to the even one.
Exam Tip
Anything about workfiles, competency, confidentiality, or scope decisions comes from a Rule, not a Standard. If an option names a Standard for one of those topics, eliminate it immediately.
Common Mistakes to Avoid
- -Assuming a reviewer automatically develops his own opinion of value
- -Attributing workfile retention to a Standard rather than the Record Keeping Rule
- -Mixing up the review pair with the mass appraisal pair because both are less familiar than Standards 1 and 2
Concept Deep Dive
Analysis
USPAP is organized in pairs: a development standard followed by a reporting standard for each kind of assignment. Standard 1 covers development of a real property appraisal and Standard 2 its reporting. Standard 3 covers development of an appraisal review and Standard 4 its reporting. Standard 5 and Standard 6 handle mass appraisal development and reporting, Standards 7 and 8 handle personal property, and Standards 9 and 10 handle business appraisal and intangible assets. An appraisal review is defined as the act or process of developing and communicating an opinion about the quality of another appraiser's work, which is exactly what the client in this stem is asking for. Recognizing the pairing structure lets you answer nearly any which-standard question without memorizing text.
Background Knowledge
You need the layout of USPAP: the Definitions, the Rules including Ethics, Record Keeping, Competency, Scope of Work, and Jurisdictional Exception, then the Standards in development and reporting pairs. You also need the definition of appraisal review and the distinction between reviewing work and appraising property.
Real-World Application
A bank's chief appraiser assigns a review of a $4 million retail appraisal. The reviewer identifies his client and intended use, states the scope of his review, evaluates whether the sales selection and cap rate support hold up, and issues a review report that says whether the work is credible without silently substituting his own value unless the assignment calls for one.
More USPAP Questions
Which statement best defines a hypothetical condition under USPAP?
According to the Competency Rule, if an appraiser lacks the knowledge and experience to complete an assignment competently, which action is NOT acceptable?
An appraiser runs only the sales comparison approach on a standard tract home and omits the cost and income approaches. Under Standard 1 this is:
A value opinion for a subdivision as if fully built out two years from now is what kind of assignment, and what does it require?
A hypothetical condition differs from an extraordinary assumption in that a hypothetical condition:
An appraiser must disclose in the certification whether they have:
A client-imposed requirement — 'use only comps from our approved list' — is best described as:
Under Standard 1, when developing a real property appraisal, an appraiser must:
The certification required by Standards Rule 2-3 must be signed by:
According to Standard 1, when developing an opinion of market value, an appraiser must analyze:
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