An appraiser discovers that a comparable sale used in an appraisal was actually an estate sale at below-market value. This information was not available during the original research. What should the appraiser do?
Correct Answer
C) Notify the client and other intended users if the information would cause the appraiser to change opinions or conclusions
According to the Ethics Rule, if an appraiser subsequently discovers information that would cause a change in opinions or conclusions, the appraiser must notify the client and other intended users of the discovery.
Why This Is the Correct Answer
Option C correctly identifies the appraiser's obligation under the Ethics Rule when subsequently discovering material information. The rule specifically requires appraisers to notify the client and other intended users when they discover information that would cause them to change their opinions or conclusions. This notification requirement ensures transparency and maintains the integrity of the appraisal process. The appraiser doesn't necessarily need to revise the entire report immediately, but must inform all parties who relied on the original appraisal.
Why the Other Options Are Wrong
Option A: Do nothing since the information was not available at the time of the appraisal
This option incorrectly suggests the appraiser has no responsibility once the original research is complete. While the information wasn't available initially, the Ethics Rule creates an ongoing obligation when material information is subsequently discovered that could change conclusions.
Option B: Immediately revise the appraisal and issue a new report
This option is too extreme and premature. While revision might eventually be necessary, the first required step is notification to the client and intended users. Immediately revising without proper notification could create confusion and doesn't follow the proper protocol established in the Ethics Rule.
Option D: File a supplemental report with the state regulatory agency
This option incorrectly focuses on regulatory reporting rather than client notification. There's no requirement to file supplemental reports with state agencies for subsequently discovered information. The primary obligation is to the client and intended users of the appraisal.
NOTIFY First Rule
Remember 'NOTIFY' - New information that's Obviously material requires Telling Intended users and Facilitating Your professional responsibility. Always notify FIRST before taking other actions like revising or filing reports.
How to use: When you see questions about subsequently discovered information, immediately think 'NOTIFY first' - the appraiser's first obligation is always to inform the client and intended users before taking any other corrective action.
Exam Tip
Look for keywords like 'subsequently discovered,' 'later found out,' or 'new information came to light' - these signal Ethics Rule questions about ongoing professional responsibility and notification requirements.
Common Mistakes to Avoid
- -Thinking responsibility ends when the appraisal is delivered
- -Believing immediate revision is required before notification
- -Assuming state regulatory filing is the primary obligation
Concept Deep Dive
Analysis
This question tests knowledge of the Ethics Rule regarding subsequent discovery of material information that could affect an appraisal's conclusions. The scenario involves discovering that a comparable sale was an estate sale at below-market value, which is a significant factor that could materially impact the appraisal's accuracy and conclusions. The appraiser must understand their ongoing professional responsibility even after completing an assignment when new material information comes to light. This reflects the principle that appraisers have a continuing duty to maintain the integrity and reliability of their work when circumstances change.
Background Knowledge
The Ethics Rule in USPAP establishes ongoing responsibilities for appraisers even after completing an assignment. When appraisers discover information that would materially affect their conclusions, they must notify those who relied on the original work to maintain professional integrity and prevent potential harm from outdated conclusions.
Real-World Application
In practice, appraisers might discover after completing an appraisal that a comparable sale was a foreclosure, estate sale, or involved seller concessions not initially known. The appraiser must promptly contact the client (often a lender) and any other parties who received the appraisal to inform them of this material information that could affect lending decisions or property valuations.
More USPAP Questions
An extraordinary assumption must be:
Under the USPAP Competency Rule, which of the following is required before an appraiser may accept an assignment?
An appraiser is developing an appraisal for a bank loan and discovers that the property has environmental contamination that significantly affects value, but the lender specifically requests that this issue not be mentioned in the report. According to USPAP, the appraiser should:
A Summary Appraisal Report must contain enough information to:
According to USPAP's Ethics Rule, an appraiser must keep confidential information about the client and intended users confidential unless disclosure is required by:
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