An assignment involves neither residential real property nor a credit transaction, and no other law prohibits using a protected characteristic. When may the appraiser rely on such a characteristic?
Correct Answer
A) When essential to the assignment and needed for credible results
If the FHAct and ECOA do not apply and no other law prohibits it, use of a protected characteristic is permitted only to the extent that it is essential to the assignment and necessary for credible assignment results.
Why This Is the Correct Answer
Option A is correct because USPAP states that, when the FHAct and ECOA do not apply and no other law prohibits it, use of or reliance on a protected characteristic is permitted only to the extent that it is essential to the assignment and necessary for credible assignment results. Both conditions must be met. Client requests, personal beliefs or a general accuracy argument do not meet that test.
Why the Other Options Are Wrong
Option B: Whenever the client requests it in writing before the work
Option B allows reliance whenever the client requests it in writing. A client request does not satisfy the requirement that the characteristic be essential to the assignment and necessary for credible results.
Option C: When the appraiser personally believes it affects buyer demand
Option C allows reliance when the appraiser personally believes it affects buyer demand. Personal belief is not the standard; reliance must be essential to the assignment and necessary for credible results.
Option D: Whenever it improves the accuracy of the value opinion
Option D allows reliance whenever it improves the accuracy of the value opinion. This broad test drops the requirement that the characteristic be essential to the assignment and necessary for credible results.
Essential and necessary, both
Even outside fair housing and fair lending, a protected characteristic may be used only if it is essential to the assignment and necessary for credible results.
How to use: Use this two-part test whenever a question asks when reliance on a protected characteristic is allowed.
Exam Tip
Pick the option that contains both parts of the test. Options based on client requests, appraiser opinions or general accuracy fall short.
Common Mistakes to Avoid
- -Assuming a client's written request makes reliance acceptable
- -Relying on a protected characteristic based on personal beliefs about buyers
- -Thinking the rule disappears entirely when the FHAct and ECOA do not apply
Concept Deep Dive
Analysis
This question tests the narrow rule for using a protected characteristic when the Fair Housing Act and ECOA do not apply and no other law prohibits it. Even then, USPAP permits reliance only to the extent the characteristic is essential to the assignment and necessary for credible results. Look for the answer that states both conditions.
Background Knowledge
The Ethics Rule's nondiscrimination provisions require compliance with antidiscrimination laws such as the Fair Housing Act and the Equal Credit Opportunity Act. Where those laws do not apply and no other law prohibits it, USPAP still limits reliance on protected characteristics to what is essential and necessary for credible results.
Real-World Application
An appraiser values a property in a nonresidential, non-credit assignment where a characteristic covered by antidiscrimination law might come up. She considers it only if it is essential to the assignment and necessary for credible results, and she does not rely on it just because the client asks.
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