An extraordinary assumption relied upon in an assignment must be handled how?
Correct Answer
D) Disclosed, with a statement it might affect results
Why this is correct: An extraordinary assumption is a condition assumed to be true for the appraisal that, if false, could alter the appraiser's conclusions. USPAS requires it to be disclosed, and the report must state that the results might be affected if the assumption proves incorrect. Why the other choices are wrong: Approved in writing by the client beforehand may be good practice but is not the USPAS handling requirement. Removed before the report may be delivered is incorrect; assumptions can be used if properly disclosed. Supported by at least one comparable sale is not a requirement for an extraordinary assumption. Exam tip: For an extraordinary assumption, always disclose and state the potential impact.
Why This Is the Correct Answer
Option D pairs the two elements USPAP actually requires: disclosure of the assumption and a statement that using it might have affected the results. That combination is what puts the reader on notice both of the uncertainty and of its potential effect on the value opinion. Disclosure must be clear and conspicuous, meaning it belongs where a reader will find it rather than buried among boilerplate. Everything else the appraiser might reasonably do, including confirming the assumption with the client, is good practice rather than the stated requirement.
Why the Other Options Are Wrong
Option A: Approved in writing by the client beforehand
Client approval is not a condition for using an extraordinary assumption, and making it one would let the client control the appraiser's development decisions. The appraiser decides what assumptions are necessary for credible results, and confirming facts with the client is sound practice but not a standards requirement. The option elevates a courtesy into a rule and, worse, puts the client in charge of the analysis.
Option B: Removed before the report may be delivered
Extraordinary assumptions exist precisely so that reports can be delivered when a relevant fact cannot be verified by the effective date, so requiring their removal would eliminate the device entirely. If an assumption cannot be used, the alternative is to resolve the fact or decline the assignment, not to strip the assumption and deliver anyway. The option treats a permitted tool as a defect that must be cured.
Option C: Supported by at least one comparable sale
Comparable sales support adjustments and value indications, not the truth of an assumed fact about the subject such as a pending permit, an unverified square footage, or an unconfirmed zoning change. No number of comparables can establish that an uncertain subject-specific fact is true. The option applies a sales comparison standard of support to something the sales grid cannot speak to.
Say It And Flag It
Two obligations, both verbal. Say it means disclose the assumption in plain view. Flag it means add the sentence warning that the result might have been different without it. If an answer choice only does one of the two, or does neither, it is not the requirement.
How to use: When a question asks how an extraordinary assumption must be handled, scan for the choice containing both disclosure and a might-have-affected statement. Discard choices about approvals, deletions, or comparable support, since none of those appear in the permitted-use conditions.
Exam Tip
Handling questions want the reporting duty, while permitted-use questions want the development conditions. Read the verb in the stem to see which set of rules is being asked about.
Common Mistakes to Avoid
- -Disclosing the assumption but omitting the statement about its potential effect on results
- -Seeking client sign-off as though approval legitimized an otherwise unsupported assumption
- -Placing the disclosure only in a standard limiting conditions addendum where readers skip it
Concept Deep Dive
Analysis
This item asks what an appraiser must actually do with an extraordinary assumption once it is relied upon, which is a reporting requirement rather than a development one. USPAP permits the device only under conditions, and the reporting condition is the one tested here: the assumption must be disclosed clearly and conspicuously, accompanied by a statement that its use might have affected the assignment results. The purpose is transparency for the intended user, who needs to see both what was assumed and that the conclusion depends on it. The other permitted-use conditions, which candidates often blend together, concern development: the assumption must be required for the intended use, must have a reasonable basis, and must still allow credible assignment results. Notice that none of the conditions involve client approval, comparable support, or removal of the assumption before delivery, which is why the distractors here are all plausible-sounding administrative steps rather than real requirements.
Background Knowledge
You need the definition of an extraordinary assumption and the permitted-use conditions taught with it: the assumption is required for the intended use, there is a reasonable basis for it, its use results in credible assignment results, and it is clearly and conspicuously disclosed along with a statement that its use might have affected results. You should be able to distinguish it from a hypothetical condition, which is known to be contrary to fact. You should also know that conspicuous disclosure means placement where a reader will actually encounter it, not inside a generic limiting conditions list.
Real-World Application
Appraising a home where the owner reports a finished basement built under permit but the county file is not yet digitized, the appraiser states an extraordinary assumption that the finished area was permitted, places the disclosure on the first page of the report near the value conclusion, and adds that if the assumption proves false the opinion of value might be affected.
More USPAP Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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