A report states a value 'subject to completion per plans and specifications.' A reader should understand that:
Correct Answer
C) The opinion treats the specified work as completed on that premise
The statement describes an opinion premised on specified completion, not an as-is opinion or a guarantee of lender approval. State the effective date and actual knowledge to determine whether completion is hypothetical at that date or an uncertain prospective premise; subject to alone does not resolve the classification.
Why This Is the Correct Answer
Option C is correct because a subject-to-completion opinion is premised on the specified work being completed. It does not describe the present as-is condition or prove inspection of finished work or lender approval. Depending on the effective date and the appraiser's knowledge, the premise may be a hypothetical condition or an uncertain prospective premise, which the report should make clear.
Why the Other Options Are Wrong
Option A: It describes the property’s present as-is condition
Option A is wrong because a subject-to-completion opinion does not describe the property's present as-is condition; it treats unfinished work as completed.
Option B: It proves the appraiser inspected the finished improvements
Option B is wrong because the statement does not prove the appraiser inspected finished improvements; the work may not yet exist.
Option D: It proves the lender has formally approved the construction budget
Option D is wrong because a subject-to-completion statement says nothing about the lender formally approving a construction budget; it describes the premise of the value opinion.
Subject to means premised
Read subject to completion as valued as if the plans were built, not as it stands today.
How to use: Use this when interpreting subject-to-completion or as-completed value statements.
Exam Tip
Do not treat subject to as proof of inspection or approval; it signals a premise that must be disclosed and classified correctly.
Common Mistakes to Avoid
- -Reading a subject-to value as the current as-is value
- -Assuming the label proves the work was inspected
- -Assuming the label settles the HC versus EA classification by itself
Concept Deep Dive
Analysis
This question tests what a "subject to completion per plans and specifications" opinion means. The opinion treats the specified work as completed on that premise. Whether the premise is a hypothetical condition or an extraordinary assumption depends on the effective date and what the appraiser knows.
Background Knowledge
A hypothetical condition is contrary to what is known to exist on the effective date but used for analysis. An extraordinary assumption concerns uncertain information as of the effective date. Subject-to-completion values rely on one of these premises, depending on the effective date and facts known.
Real-World Application
A lender orders a value for a house that is only framed. The appraiser values it as if completed per the builder's plans, discloses the premise, and identifies whether it is a hypothetical condition based on the effective date and current facts.
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