An appraisal is developed for a lender but the borrower is named as an intended user. What follows?
Correct Answer
A) The report must be written to serve both users
Why this is correct: USPAP requires the appraisal report to be appropriate for all intended users. Naming the borrower as an intended user means the report's content and communication level must serve both the lender and borrower. Why the other choices are wrong: "The borrower gains the right to direct the work" is false; only the client (here, the lender) has that authority. "The report must be a Restricted Appraisal Report" is incorrect; report type depends on intended use, not the number of users. "The lender ceases to be the client of record" is wrong; the client relationship remains unchanged. Exam tip: Intended users influence report content; the client controls the assignment.
Why This Is the Correct Answer
Intended users are those identified as parties who will use the report, and USPAP requires the report to contain sufficient information for all of them to understand it.
Why the Other Options Are Wrong
Option B: The borrower gains the right to direct the work
Only the client sets assignment parameters. Being an intended user confers use of the report, not authority over the work.
Option C: The report must be a Restricted Appraisal Report
The report option is chosen based on what the intended users and intended use require. Adding a user does not dictate a Restricted report — indeed it points away from one.
Option D: The lender ceases to be the client of record
The lender remains the client. Identifying an additional intended user does not change who engaged the appraiser.
Client Hires, Users Read
Client Hires, Users Read. Adding a reader does not add a boss.
How to use: Identify intended users at the outset, since the report's content and level of explanation depend on who they are.
Exam Tip
A Restricted Appraisal Report is generally inappropriate where there are intended users beyond the client, since its content is intended for the client alone.
Common Mistakes to Avoid
- -Treating an intended user as a client
- -Using a Restricted report where additional intended users exist
- -Accepting direction from a non-client intended user
Concept Deep Dive
Analysis
Client and intended user are separate concepts, and confusing them causes most of the errors in this area. The client is the party who engages the appraiser and with whom the confidentiality obligation runs. Intended users are those the appraiser identifies, at the time of assignment, as the parties who will use the report — a set that includes the client and may include others the client names. Naming the borrower as an intended user therefore does two things. It makes the borrower someone to whom the report may be disclosed, and it means the report must be written so that the borrower can understand it, since USPAP requires sufficient information for the intended users. What it does not do is transfer any authority: the lender remains the client, and only the client sets the assignment's parameters. Nor does adding an intended user dictate the report option; the appraiser selects that based on what the intended users and intended use require.
Background Knowledge
USPAP distinguishes the client, who engages the appraiser, from intended users, whom the appraiser identifies as parties who will use the report. Reports must contain sufficient information for all intended users.
Real-World Application
An appraiser identifies the lender as client and the lender and borrower as intended users, and writes the report at a level the borrower can follow.
More USPAP Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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