An appraiser is offered an assignment with a value effective date 30 days in the future. Which response is consistent with USPAP, assuming the appraiser can perform it competently?
Correct Answer
D) May accept and clearly identify the prospective effective date and related assumptions
USPAP permits a prospective value opinion. The appraiser may accept if competent and able to produce credible results, must identify the future effective date and disclose relevant extraordinary assumptions or hypothetical conditions. USPAP does not require accepting every such request or postponing all work until that date.
Why This Is the Correct Answer
Option D is correct because USPAP permits a prospective value opinion, meaning one whose effective date falls after the date of the report. A competent appraiser may accept the assignment as long as the future effective date is clearly identified and any relevant extraordinary assumptions or hypothetical conditions are disclosed.
Why the Other Options Are Wrong
Option A: Use today’s facts without addressing the prospective effective date or any assumptions about it
Option A is wrong because using today's facts without addressing the prospective effective date or the assumptions about it would misstate the assignment. Intended users would not understand that the value is as of a future date or what that opinion rests on.
Option B: Decline because future effective dates are prohibited
Option B is wrong because future effective dates are not prohibited. USPAP recognizes prospective value opinions, so declining for that reason misreads the standard.
Option C: Wait until the effective date before doing any research
Option C is wrong because USPAP does not require the appraiser to wait until the effective date before doing any research. A prospective opinion is developed now, using current information and disclosed assumptions about the future date.
Future date: name it, explain it
For a prospective appraisal, think name the date and state the assumptions. Both pieces must appear so users know the value is a forecast as of a later date.
How to use: Use this when a question involves an effective date after the report date.
Exam Tip
Answers that ban prospective or retrospective appraisals outright are usually wrong; look for the choice that permits the work with proper disclosure.
Common Mistakes to Avoid
- -Believing USPAP forbids future effective dates
- -Omitting the assumptions that a prospective opinion depends on
- -Thinking research must wait until the effective date arrives
Concept Deep Dive
Analysis
This question tests whether you know that USPAP permits prospective value opinions. Ask whether the appraiser can produce credible results and then what must be disclosed: the future effective date and any assumptions or conditions that the opinion depends on.
Background Knowledge
An appraisal can be current, retrospective or prospective depending on how the effective date relates to the report date. A prospective value opinion has an effective date after the report date and usually relies on assumptions about conditions at that future date, which must be disclosed so users are not misled.
Real-World Application
A lender asks for the value of a house as of the expected completion of a renovation two months from now. The appraiser accepts, states the prospective effective date, and discloses the assumption that the renovation will be completed as described in the plans.
More USPAP Questions
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