An appraiser completed a URAR and determined the subject property value to be $485,000. The appraiser then discovers that comparable sale #1 had an undisclosed $15,000 seller credit for repairs that should have resulted in a downward adjustment. What is the most appropriate action?
Correct Answer
B) Make a supplemental report correcting the error
When an appraiser discovers a significant error that affects the value conclusion after completing a report, USPAP requires the appraiser to take appropriate steps to correct the error, typically through a supplemental report that addresses the correction.
Why This Is the Correct Answer
Option B is correct because USPAP Standards Rule 2-3 requires appraisers to correct significant errors that affect the value conclusion through a supplemental report. A supplemental report is the appropriate mechanism to address the discovered error while maintaining the integrity of the original appraisal work. This approach ensures proper documentation, maintains the appraisal file's completeness, and fulfills the appraiser's professional obligations. The supplemental report would include the corrected adjustment for comparable sale #1 and any resulting change to the final value conclusion.
Why the Other Options Are Wrong
Option A: Ignore the discovery since the report is complete
Option A is wrong because ignoring a significant error violates USPAP requirements and professional ethics. Even though the report is technically complete, discovering a material error creates an obligation to correct it, especially when it involves a substantial amount like $15,000 that could affect the value conclusion.
Option C: Simply notify the client of the discovery
Option C is insufficient because simply notifying the client does not fulfill the appraiser's obligation to formally correct the error in the appraisal documentation. While client notification may be appropriate, it must be accompanied by proper correction through a supplemental report to maintain professional standards.
Option D: File an amended report within 30 days
Option D is wrong because USPAP does not specify a 30-day timeframe for corrections, and an 'amended report' is not the standard terminology. The correct approach is a supplemental report, and the timing should be as soon as reasonably possible after discovering the error, not within an arbitrary 30-day period.
SUPPLEMENT the ERROR
Remember 'SUPPLEMENT' - when you discover a Significant error that Undermines your Previous Professional work, you must Legally and Ethically Make Effective New Testimony through a supplemental report.
How to use: When you see questions about discovered errors after report completion, think 'SUPPLEMENT' and remember that significant errors require formal correction through supplemental reports, not informal notifications or ignoring the problem.
Exam Tip
Look for keywords like 'discovers,' 'significant error,' 'after completion' - these signal USPAP correction requirements. The answer will typically involve supplemental reports rather than ignoring errors or informal corrections.
Common Mistakes to Avoid
- -Thinking completed reports cannot be corrected
- -Believing informal client notification is sufficient
- -Confusing supplemental reports with amended reports
- -Not recognizing when errors are significant enough to require correction
Concept Deep Dive
Analysis
This question tests knowledge of USPAP requirements for handling significant errors discovered after report completion. The Uniform Standards of Professional Appraisal Practice (USPAP) establishes clear protocols for appraisers when material errors are found that could affect the value conclusion. A $15,000 undisclosed seller credit represents a significant error that would require a downward adjustment to comparable sale #1, potentially affecting the overall value conclusion. The appraiser has an ethical and professional obligation to correct this error through proper channels rather than ignoring it or handling it informally.
Background Knowledge
USPAP Standards Rule 2-3 addresses the appraiser's responsibility when significant errors are discovered after report completion. A supplemental report is a formal addendum that corrects or updates information in the original appraisal without requiring a complete new report.
Real-World Application
In practice, appraisers might discover undisclosed seller concessions, incorrect property information, or calculation errors after submitting reports. Professional liability and USPAP compliance require formal correction through supplemental reports to protect both the appraiser and report users.
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The Dodd-Frank Act established which requirement specifically related to appraisal independence?
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