An extraordinary assumption was reasonably supported, properly used and disclosed in an appraisal report. Later, the assumed information is found to be false. Which conclusion is best supported?
Correct Answer
B) The conclusions may no longer be reliable
A false extraordinary assumption can undermine the opinions that relied on it, so their reliability and any needed response must be reassessed. It does not automatically establish that the original appraisal was defective, mandate a fee refund or require a second appraiser. Proper disclosure alone does not establish compliance: the assumption also needed a reasonable basis and a use consistent with credible analysis. Disclosure does not eliminate the appraiser’s professional responsibilities.
Why This Is the Correct Answer
Option B is correct because an extraordinary assumption is uncertain information that, if found to be false, could alter the appraiser's opinions or conclusions. When it proves false, the opinions that relied on it may no longer be reliable and should be reassessed. The appraiser then considers what response is appropriate.
Why the Other Options Are Wrong
Option A: The report was defective when it was issued
Option A says the report was defective when it was issued. If the assumption was reasonably supported, properly used and disclosed, its later failure does not by itself establish that the original report was defective.
Option C: The appraiser must refund the fee received
Option C says the appraiser must refund the fee received. USPAP does not mandate a fee refund simply because a properly used extraordinary assumption later proves false.
Option D: The client must commission a second appraisal
Option D says the client must commission a second appraisal. A false assumption can call the results into question, but it does not by itself require the client to order another appraisal.
False Assumption, Shaky Results
An extraordinary assumption is a support beam under the conclusions. If that beam proves false, the conclusions resting on it may not hold.
How to use: Use this image when a question asks what happens once an assumed fact proves untrue.
Exam Tip
Choose the measured answer about reliability. Options that declare the report defective or require refunds or new appraisals overstate the consequence.
Common Mistakes to Avoid
- -Concluding the original report was defective because the assumption later failed
- -Believing disclosure alone makes an extraordinary assumption compliant
- -Assuming a refund or second appraisal is required by USPAP
Concept Deep Dive
Analysis
This question tests the consequences when a properly supported extraordinary assumption later proves false. By definition, an extraordinary assumption concerns uncertain information that, if found to be false, could alter the appraiser's opinions or conclusions. The best-supported conclusion is that the opinions relying on it may no longer be reliable, not that the original report was defective or that specific remedies are mandatory.
Background Knowledge
An extraordinary assumption may be used when it is required for credible results, has a reasonable basis, results in a credible analysis and is properly disclosed. Disclosure tells intended users that the results depend on that assumption. If the assumption turns out to be false, the results that depended on it may change.
Real-World Application
An appraiser values a home assuming, with a reasonable basis, that a well produces adequate water, and discloses this extraordinary assumption. A later test shows the well is inadequate. The value opinion that relied on the assumption may no longer be reliable, and the client may need to reconsider its use of the report.
More USPAP Questions
In a cost approach for an improved property, an appraiser estimates site value by sales comparison, allocation and extraction, then settles on one site-value figure before final reconciliation. How is this step best described?
An otherwise applicable valuation approach cannot be developed reliably from the available data. The remaining scope can produce credible assignment results. What should the appraiser do?
May an appraiser use a hypothetical condition in any assignment?
An appraisal has a current effective date and permits an extraordinary assumption if its requirements are met. Which situation involves uncertain information rather than a fact known to be contrary to reality on that date?
Why must a report identify any real property interest that is being excluded from the value opinion?
Which review best helps explain divergent cost, sales-comparison and income indications?
Two value indications are $340,000 and $392,000. What is the difference as a percentage of the lower indication, rounded to one decimal place?
An unauthorized third party requests a lender-client’s report. No due-process or other permitted disclosure exception applies. How should the appraiser respond?
An appraiser proposes to assume there are no hidden defects. Which fact would characterize that assumption as extraordinary under the USPAP 2024 definition, rather than justify dismissing it as routine boilerplate?
Which considerations provide the soundest basis for reconciling appraisal indications?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Previous Question
Under Fannie Mae's Selling Guide, what must the appraiser's sales comparison comments include about the comparables' adjusted values?
Next Question
An appraiser assigns the following weights to the approach indications: sales comparison $3,100,000 at 30%; cost $4,900,000 at 50%; income $2,600,000 at 20%. What is the weighted indication, rounded to the nearest dollar?