An appraisal report states that the property is valued 'as if' free of an existing lease that is known to exist. This is:
Correct Answer
A) A hypothetical condition requiring prominent disclosure
Why this is correct: A hypothetical condition is an assumption that is contrary to what is known to exist on the effective date of the appraisal. An existing lease is a known fact. Valuing the property 'as if' free of that lease is therefore a hypothetical condition, which USPAP requires to be disclosed prominently. Why the other choices are wrong: An extraordinary assumption assumes something is true when its truth is uncertain; here, the lease's existence is certain, not uncertain. This is not a jurisdictional exception, which applies to specific laws, not assignment conditions. An ordinary limiting condition is for typical report boilerplate, not for a specific, contrary-to-fact assumption that must be highlighted. Exam tip: 'Contrary to known fact' signals a hypothetical condition. 'Uncertain but assumed true' signals an extraordinary assumption.
Why This Is the Correct Answer
Why this is correct: A hypothetical condition is an assumption that is contrary to what is known to exist on the effective date of the appraisal. An existing lease is a known fact. Valuing the property 'as if' free of that lease is therefore a hypothetical condition, which USPAP requires to be disclosed prominently. Why the other choices are wrong: An extraordinary assumption assumes something is true when its truth is uncertain; here, the lease's existence is certain, not uncertain. This is not a jurisdictional exception, which applies to specific laws, not assignment conditions. An ordinary limiting condition is for typical report boilerplate, not for a specific, contrary-to-fact assumption that must be highlighted. Exam tip: 'Contrary to known fact' signals a hypothetical condition. 'Uncertain but assumed true' signals an extraordinary assumption.
More USPAP Questions
Which type of appraisal report may contain the appraiser's analyses, opinions, and conclusions but is intended for use by the client only?
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Under Standard 1, when developing a real property appraisal, an appraiser must:
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