An appraiser discovers after completing a URAR that one of the comparable sales was actually a foreclosure sale, which significantly affects the analysis. According to USPAP, what action should the appraiser take?
Correct Answer
C) Issue a new appraisal report with corrected information
Why this is correct: USPAP's Standards Rule 2-3 requires an appraiser to promptly disclose any significant error upon discovery after report issuance. A foreclosure sale is not an arm's length transaction and using it as a comparable without adjustment is a material error that affects credibility, necessitating a corrected report. Why the other choices are wrong: 'Send an email to the client' is insufficient; a formal corrected report is required. 'Make a note in the client file' fails the disclosure obligation to the client and intended users. 'Wait to see if the client... notices' violates the duty of care and prompt correction. Exam tip: USPAP requires a corrected report for significant errors. Know that foreclosure sales require special consideration.
Why This Is the Correct Answer
USPAP Standard 2 and the Ethics Rule require appraisers to correct significant errors that materially affect the appraisal analysis once discovered. A foreclosure sale typically involves distressed circumstances that result in below-market pricing, making it inappropriate as a comparable for estimating market value unless properly adjusted. The misidentification of such a sale as an arm's length transaction would fundamentally compromise the reliability of the value conclusion. Therefore, issuing a corrected appraisal report is the only appropriate response that maintains professional standards and protects the client's interests.
Why the Other Options Are Wrong
FIX-IT Rule
F - Find the error, I - Immediately act, X - eXamine impact, I - Issue correction, T - Take responsibility. Remember: 'When you FIX-IT, you must report it!'
How to use: When you see any question about post-delivery error discovery, immediately think 'FIX-IT' and remember that significant errors always require formal corrected reports, never informal communications or passive responses.
Exam Tip
Look for keywords like 'significant error,' 'material impact,' or 'discovered after completion' - these always point to the need for a formal corrected report under USPAP, never informal fixes.
Common Mistakes to Avoid
- -Thinking an email explanation is sufficient for material errors
- -Believing that undiscovered errors don't require correction
- -Assuming file documentation alone satisfies USPAP correction requirements
Concept Deep Dive
Analysis
This question tests understanding of USPAP's requirements for handling significant errors discovered after report completion. The Uniform Standards of Professional Appraisal Practice (USPAP) establishes strict protocols for maintaining the integrity and accuracy of appraisal reports. When a material error is discovered that could affect the credibility of the analysis or the client's decision-making, the appraiser has a professional and ethical obligation to take corrective action. A foreclosure sale misidentified as an arm's length transaction represents a fundamental error in comparable selection that would materially impact value conclusions and violate the appraiser's duty of care.
Background Knowledge
USPAP requires appraisers to take immediate corrective action when significant errors are discovered after report delivery, particularly when such errors materially affect the analysis or conclusions. Foreclosure sales are typically considered distressed sales that do not reflect normal market conditions and require special consideration in comparable selection and adjustment processes.
Real-World Application
In practice, appraisers might discover errors through client feedback, market research updates, or quality control reviews. Professional liability and USPAP compliance require immediate formal correction rather than hoping the error goes unnoticed or attempting informal fixes that lack proper documentation.
More USPAP Questions
An appraiser is analyzing three comparable sales with the following data: Sale 1: $350,000 with +$10,000 adjustments; Sale 2: $340,000 with -$5,000 adjustments; Sale 3: $360,000 with -$15,000 adjustments. What are the adjusted sale prices?
A lender orders an appraisal for a $300,000 residential loan. After receiving the appraisal, the loan officer contacts the appraiser requesting that certain language be changed to better support the loan approval. This scenario represents a violation of:
How often must appraisers complete continuing education to maintain their license or certification?
Under FIRREA, which federal agency was given the authority to set minimum standards for real estate appraisers performing appraisals in federally related transactions?
How often must licensed and certified appraisers complete continuing education to maintain their credentials according to AQB requirements?
FIRREA was enacted primarily in response to which financial crisis?
In a narrative appraisal report, which section would typically contain the appraiser's analysis of highest and best use?
A narrative appraisal report for a commercial property must include detailed analysis of income, expenses, and capitalization rates. This level of detail is primarily required because:
Under the Dodd-Frank Act, which entity is responsible for establishing appraisal standards for federally related transactions?
In the URAR form, what does the appraiser indicate in the 'Subject' column for site size?
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