After delivering an appraisal, an appraiser learns that a relied-on comparable was an estate sale at below-market terms, a fact that was reasonably available but overlooked during the assignment. The information may materially affect the value conclusion. What is the most appropriate first step?
Correct Answer
B) Reassess its effect and notify the client if the conclusion may change
Because the terms were reasonably available but overlooked, the issue may be a substantial error under SR 1-1(b) that significantly affects the appraisal and could make the report misleading. First reassess the comparable's effect on the analysis. If the conclusion may change, notify the client and determine whether correction is appropriate. Do not change the value automatically before the analysis, and do not assume the estate-sale label proves a discount. Filing with a regulator is not the required response, and ignoring a material overlooked error is not acceptable.
Why This Is the Correct Answer
Option B is correct because the overlooked estate-sale terms may be a substantial error that significantly affects the appraisal, so the appraiser should first reassess the comparable's effect on the analysis. If the conclusion may change, the appraiser notifies the client and determines whether a correction is appropriate. This avoids both ignoring a material error and changing the value before the analysis is done.
Why the Other Options Are Wrong
Option A: Immediately revise the appraisal and issue a new report to all parties
Option A is wrong because immediately revising the appraisal and issuing a new report to all parties skips the analysis; the appraiser does not yet know how the estate-sale terms affect value, and the estate-sale label alone does not prove a discount.
Option C: File a supplemental report with the state regulator
Option C is wrong because filing a supplemental report with the state regulator is not the required response; the issue concerns the assignment and its client, not a report to a regulator.
Option D: Do nothing, as the information was not then available
Option D is wrong because the information was reasonably available during the assignment, so saying it was not then available is incorrect, and ignoring a material overlooked error is not acceptable.
Reassess, then notify
When a missed fact surfaces after delivery, analyze first and communicate second. Do not jump to a new value or ignore the problem.
How to use: Use this when a question asks for the first step after discovering a possible error in a delivered appraisal.
Exam Tip
When a question asks for the first step, prefer an answer that analyzes the issue before acting on a conclusion that has not yet been reached.
Common Mistakes to Avoid
- -Revising the value before analyzing the comparable's effect
- -Assuming an estate sale is automatically below market
- -Ignoring an error because the report was already delivered
Concept Deep Dive
Analysis
This question tests how to respond after delivery when an overlooked, reasonably available fact may have produced a substantial error. The key words are "most appropriate first step": analysis comes before any revision. The appraiser should first measure the effect of the comparable's terms and then involve the client if the conclusion may change.
Background Knowledge
SR 1-1(b) requires that an appraiser not commit a substantial error of omission or commission that significantly affects an appraisal. Facts that were reasonably available but missed can amount to such an error. Sales with atypical terms, such as some estate sales, need analysis of whether the price reflects market conditions.
Real-World Application
Two weeks after delivery, an appraiser learns that one comparable was sold by an estate with a quick-sale arrangement noted in public records. The appraiser re-examines whether the price was below market and how much weight the sale received, then contacts the client because the value opinion may change.
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