An appraiser communicates an opinion of value by telephone. What obligation follows?
Correct Answer
C) A summary must be placed in the workfile
Why this is correct: Under USPAP, any communication of an appraisal opinion, including oral reports, is an appraisal report. The appraiser must maintain a workfile that documents the communication, such as a summary of what was communicated. Why the other choices are wrong: Oral reports are governed by USPAP standards, so 'None, since only written reports are governed' is false. There is no universal USPAP requirement that an oral report 'must be confirmed in writing' by the appraiser. The client is not required to record the conversation. Exam tip: Any form of value communication requires a workfile entry. Think 'document what you said.'
Why This Is the Correct Answer
Option C is correct because a summary of the oral report must be placed in the workfile, alongside the data and analyses supporting the conclusions. That documentation lets the appraiser reconstruct what was communicated and demonstrate the support behind it. The workfile must be retained for the period the rule specifies, extended if testimony follows. The obligation attaches because an oral value opinion is a report, not a casual conversation.
Why the Other Options Are Wrong
Option A: None, since only written reports are governed
USPAP governs oral reports as well as written ones, and an opinion of value communicated by any means triggers the standards. Believing the telephone creates an exemption is a persistent misconception that has produced real disciplinary exposure. The form of communication changes documentation practice, not applicability.
Option B: The oral report must be confirmed in writing
Written confirmation is often a sensible business practice and some clients require it, but the standards call for a summary in the workfile rather than issuance of a written report. An appraiser who documents the file properly has complied even if nothing further is sent to the client. Confusing good practice with a requirement is what makes this option tempting.
Option D: The client must record the entire conversation
Nothing obliges a client to record a conversation, and the duty runs to the appraiser rather than to the client. Recording would also raise consent issues in jurisdictions requiring all parties to agree. The appraiser's own summary is what the rule contemplates.
Spoken still counts
The microphone does not lower the standard. Say a value out loud and you have issued a report, so write down what you said and keep the support behind it.
How to use: Whenever a stem involves communicating value without a document, apply the full set of obligations and pick the workfile answer. Options that exempt oral work are always wrong.
Exam Tip
Distinguish what the rule requires from what good practice suggests. Written follow-up is prudent; a workfile summary is mandatory.
Common Mistakes to Avoid
- -Assuming oral reports fall outside USPAP
- -Documenting the conclusion without the supporting analyses
- -Believing a written follow-up is required rather than a workfile summary
- -Failing to retain the workfile for the full required period
Concept Deep Dive
Analysis
This tests the treatment of oral reports, which USPAP recognizes as a legitimate form of communication carrying the same obligations as written ones. Communicating an opinion of value by telephone is an appraisal report, so the development standards apply in full and the record keeping obligation attaches. The Record Keeping Rule requires a workfile for each assignment containing the data, information, and analyses necessary to support the opinions and conclusions, and for an oral report it must also contain a summary of the communication. What the rule does not require is converting the oral report into a written one; the appraiser may follow up in writing as a matter of practice or client preference, but the standards require documentation in the file rather than delivery of a written report. Note as well that the substance of what must be addressed in an oral report mirrors the written requirements, so an appraiser cannot use the telephone to shortcut the analysis.
Background Knowledge
You need the Record Keeping Rule's workfile requirements, including a summary of any oral report, and the retention period running from preparation or from the conclusion of any judicial proceeding involving testimony, whichever is later. You should also know that oral reports must address substantially the same matters as written reports, and that expert testimony is itself a form of oral report.
Real-World Application
A longstanding client calls for a value opinion before a board meeting. You complete the analysis, deliver the opinion by phone, and immediately write a file memorandum recording the date, the client contact, the opinion, the effective date, and the assumptions communicated, filing it with your supporting data.
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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