An appraiser is completing a URAR form and discovers that one of the comparable sales was the appraiser's own listing from two years ago. How should this be handled?
Correct Answer
B) Use the comparable and disclose the prior involvement
USPAP requires disclosure of any prior services regarding the property being appraised or comparable properties within the three years prior to acceptance of the assignment. The appraiser should disclose the prior involvement but may still use the comparable if it's the best available data.
Why This Is the Correct Answer
USPAP requires disclosure of any prior services regarding the property being appraised or comparable properties within the three years prior to acceptance of the assignment. The appraiser should disclose the prior involvement but may still use the comparable if it's the best available data.
Why the Other Options Are Wrong
Option A: Use the comparable but increase the adjustment by 10%
Arbitrarily increasing adjustments by 10% has no basis in appraisal methodology and doesn't address the ethical disclosure requirement. Adjustments should be based on market data and analysis, not arbitrary percentages to compensate for potential bias.
Option C: Exclude the comparable from the analysis
Excluding otherwise valid comparable sales solely due to prior involvement would potentially harm the quality of the appraisal analysis. USPAP requires disclosure, not automatic exclusion, allowing the appraiser to use the best available market data.
Option D: Use the comparable without any special disclosure
Failing to disclose prior involvement violates USPAP Ethics Rule requirements and could constitute a significant ethical breach. This lack of transparency prevents appraisal users from making informed decisions about potential conflicts of interest.
The 3-D Rule
Remember '3-D': 3 years, Disclose, Don't exclude. Within 3 years = Disclose prior services, but Don't automatically exclude the comparable.
How to use: When you see questions about prior involvement with comparables, immediately think '3-D' - check if it's within 3 years (yes), then Disclose (required), but Don't exclude unless there are other reasons.
Exam Tip
Look for keywords like 'prior involvement,' 'appraiser's listing,' or 'previous services' - these almost always trigger USPAP disclosure requirements, not exclusion requirements.
Common Mistakes to Avoid
- -Thinking prior involvement automatically disqualifies a comparable
- -Believing disclosure isn't required if the involvement was minimal
- -Assuming arbitrary adjustments can substitute for proper disclosure
Concept Deep Dive
Analysis
This question tests knowledge of USPAP Ethics Rule requirements regarding disclosure of prior services and potential conflicts of interest. The Uniform Standards of Professional Appraisal Practice (USPAP) mandates that appraisers disclose any prior services performed on the subject property or comparable properties within three years of accepting the current assignment. This disclosure requirement ensures transparency and allows users of the appraisal to evaluate potential bias or conflicts. The key principle is that disclosure doesn't automatically disqualify the use of data, but rather provides necessary context for the appraisal user.
Background Knowledge
USPAP Ethics Rule requires disclosure of prior services on subject or comparable properties within three years of the current assignment acceptance date. This disclosure must be included in the appraisal report and allows users to evaluate potential conflicts while still permitting use of relevant market data.
Real-World Application
In practice, appraisers often work in specific geographic areas where they may have previously listed, appraised, or consulted on properties that later become relevant comparables. Proper disclosure maintains professional integrity while allowing use of valuable local market knowledge.
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