An appraiser is offered her first-ever going-concern assignment on a marina. Under the Competency Rule she may accept only if she:
Correct Answer
C) Discloses the gap, then gains the competency or brings in help
Why this is correct: The Competency Rule provides a three-step path: 1) disclose the lack of knowledge or experience to the client before acceptance, 2) take steps to become competent (e.g., study, associate with an expert), and 3) describe in the report the steps taken to complete the assignment competently. Why the other choices are wrong: A liability waiver does not satisfy USPAP. A college course is not the only way to gain competency. A reduced fee does not address the competency requirement. Exam tip: You can accept an assignment outside your experience if you disclose, get competent, and report how you did it.
Why This Is the Correct Answer
Option C is right because it names the sequence the rule actually prescribes: disclose the gap to the client before acceptance, then acquire the competency or bring in someone who has it. The disclosure must come first, because the client is entitled to decide whether to engage an appraiser who will be learning on the assignment. The report then has to describe both the gap and the steps taken, so intended users can weigh the work accordingly. If the steps available will not produce competency in the time the assignment allows, the appraiser declines.
Why the Other Options Are Wrong
Option A: Has the client sign a liability waiver
A liability waiver is a private allocation of financial risk that does nothing about the quality of the work or the appraiser's obligations under the standards. It also cannot bind intended users who are not parties to it, and the client cannot waive a rule written for the protection of the public. Nothing in the COMPETENCY RULE contemplates a waiver as a substitute for disclosure and preparation.
Option B: First completes an accredited college course on marina operations
Formal coursework is one route to competency but nowhere near the only one; the rule expressly contemplates personal study and association with someone who has the required knowledge and experience. Requiring an accredited college course would make competency unattainable for most specialized assignments. What matters is achieving the competency, not the credential that documents the effort.
Option D: Charges a reduced fee reflecting inexperience
Fee level has no relationship to competency and adjusting it addresses nothing the rule cares about. A discounted inadequate appraisal is still an inadequate appraisal, and pricing work below its cost can pressure the scope of work in ways that make credible results harder to reach. The client's remedy for inexperience is disclosure and informed consent, not a discount.
Disclose, acquire, describe
Three verbs in a fixed order. Disclose the gap before you accept. Acquire the competency, by study or by association. Describe both the gap and the steps in the report. Miss the first and the other two cannot cure it.
How to use: When a stem places an appraiser outside her experience, look for an option containing disclosure plus a route to competency. Reject waivers, discounts, and single prescribed credentials, and remember that declining is also always available.
Exam Tip
Note that competency questions can arise mid-assignment as well; if the appraiser discovers the gap after acceptance, the same disclose-acquire-describe sequence applies as soon as it is identified.
Common Mistakes to Avoid
- -Acquiring competency quietly without disclosing to the client first
- -Omitting from the report the description of the gap and the steps taken
- -Believing only formal education can establish competency
- -Overlooking geographic and regulatory competency as separate from property-type competency
Concept Deep Dive
Analysis
This question tests the COMPETENCY RULE, which is often misread as a prohibition when it is actually a procedure. The rule requires that an appraiser either have the knowledge and experience to complete an assignment competently or, before accepting it, disclose the lack of knowledge or experience to the client and then take the steps necessary to complete the assignment competently. The report must describe the lack of knowledge or experience and the steps taken to address it. Competency has several dimensions - the property type, the market, the intended use, the applicable methods, and any laws and regulations that apply - and a going-concern marina assignment implicates most of them at once, since it blends real property with personal property and an operating business. The rule also recognizes that competency can be acquired through personal study, association with an appraiser who has the necessary knowledge, or retention of others who do, and it obliges the appraiser to decline or withdraw if competency cannot be achieved.
Background Knowledge
You need the COMPETENCY RULE in full - the requirement to be competent or to disclose, acquire, and describe; the dimensions of competency including property type, market, intended use, methods, and applicable laws and regulations; the routes to acquiring it; and the obligation to decline or withdraw where competency cannot be achieved. You should also know that a going-concern assignment may involve real property, personal property, and intangible business components, each with its own competency and standards implications.
Real-World Application
An appraiser offered a marina going-concern assignment tells the client in writing that she has not previously valued a marina, proposes to associate with a colleague experienced in going-concern work, and, when the client agrees, describes in the report both the initial lack of experience and the association that supplied it.
More USPAP Questions
Which statement best defines a hypothetical condition under USPAP?
According to the Competency Rule, if an appraiser lacks the knowledge and experience to complete an assignment competently, which action is NOT acceptable?
An appraiser runs only the sales comparison approach on a standard tract home and omits the cost and income approaches. Under Standard 1 this is:
A value opinion for a subdivision as if fully built out two years from now is what kind of assignment, and what does it require?
A hypothetical condition differs from an extraordinary assumption in that a hypothetical condition:
An appraiser must disclose in the certification whether they have:
A client-imposed requirement — 'use only comps from our approved list' — is best described as:
Under Standard 1, when developing a real property appraisal, an appraiser must:
The certification required by Standards Rule 2-3 must be signed by:
According to Standard 1, when developing an opinion of market value, an appraiser must analyze:
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