According to USPAP Standard 2, if an appraiser uses extraordinary assumptions in developing an appraisal, what must be included in the report?
Correct Answer
B) The extraordinary assumptions and a statement that their use might have affected the assignment results
USPAP Standard 2 requires that reports contain any extraordinary assumptions used and include a statement that their use might have affected the assignment results. This disclosure helps users understand the conditional nature of the appraisal.
Why This Is the Correct Answer
Option B correctly identifies both required elements under USPAP Standard 2: the disclosure of the extraordinary assumptions themselves and the mandatory statement about their potential impact on assignment results. This dual requirement ensures complete transparency and helps users understand that the appraisal conclusions are conditional upon these assumptions being true. The standard specifically mandates this language to alert users that different conclusions might result if the assumptions prove false. This comprehensive disclosure protects all parties by clearly communicating the conditional nature of the appraisal.
Why the Other Options Are Wrong
Option A: Only a statement that extraordinary assumptions were used
Option A is incomplete because it only requires stating that extraordinary assumptions were used, but omits the mandatory statement about how their use might have affected the assignment results, which is equally required by USPAP Standard 2.
Option C: A detailed explanation of why ordinary assumptions were insufficient
Option C is incorrect because USPAP does not require appraisers to explain why ordinary assumptions were insufficient, only to disclose the extraordinary assumptions used and their potential impact on results.
Option D: Alternative value conclusions without the extraordinary assumptions
Option D is wrong because USPAP does not require alternative value conclusions without the extraordinary assumptions, only the disclosure of the assumptions and impact statement.
The EA Double Disclosure Rule
Remember 'EA-DD': Extraordinary Assumptions require Double Disclosure - both the assumption itself AND the impact statement. Think 'Tell what you assumed AND warn it might matter.'
How to use: When you see questions about extraordinary assumption reporting requirements, immediately think 'EA-DD' and look for the answer that includes BOTH the assumption disclosure AND the impact warning statement.
Exam Tip
Look for answers that include both components: the extraordinary assumptions themselves AND the statement about potential impact on results - never choose partial disclosure options.
Common Mistakes to Avoid
- -Thinking only the assumption itself needs to be disclosed
- -Believing detailed explanations of why assumptions were necessary are required
- -Assuming alternative value conclusions must be provided
Concept Deep Dive
Analysis
USPAP Standard 2 establishes specific reporting requirements for appraisal reports, including mandatory disclosures when extraordinary assumptions are used. Extraordinary assumptions are assumptions that, if found to be false, could alter the appraiser's opinions or conclusions and are presumed to be true as of the effective date of the appraisal. The standard requires transparency in reporting to ensure users understand the conditional nature of the conclusions. This disclosure requirement protects both the appraiser and the client by clearly communicating the limitations and assumptions underlying the valuation.
Background Knowledge
USPAP Standard 2 governs appraisal reporting requirements and mandates specific disclosures to ensure transparency and protect users. Extraordinary assumptions are hypothetical conditions that are presumed to be true as of the effective date but could materially affect the appraisal if proven false.
Real-World Application
When appraising a property assuming completion of planned renovations, the appraiser must state the assumption about completion and include language like 'use of this extraordinary assumption might have affected the assignment results' to alert users that the value depends on the renovations actually being completed.
More Report Writing Questions
Under FIRREA, which federal agency has the authority to set minimum standards for real estate appraisals in federally related transactions?
What is the minimum transaction threshold for requiring a state licensed or certified appraiser under Title XI for most federally related transactions?
The Dodd-Frank Act established which requirement specifically related to appraisal independence?
Which of the following is NOT a responsibility of the Appraisal Subcommittee (ASC)?
State appraiser regulatory agencies are primarily responsible for which of the following functions?
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