Assume an extraordinary assumption satisfies the applicable development requirements and is used in a written real-property appraisal. What reporting treatment is required?
Correct Answer
D) Clear, conspicuous disclosure, plus a statement it may affect results
State the extraordinary assumption clearly and conspicuously and state that its use might have affected assignment results. This is a reporting duty in addition to development conditions: the assumption must be required to properly develop credible opinions and conclusions, have a reasonable basis, and result in credible analysis under SR 1-2(f). Client consent alone does not cure failure of these conditions, and USPAP imposes no universal one-comparable test.
Why This Is the Correct Answer
Option D is correct because the report must clearly and conspicuously state all extraordinary assumptions and state that their use might have affected the assignment results. This reporting duty is in addition to the development conditions in SR 1-2(f). Disclosure lets intended users understand how the assumption bears on the opinion.
Why the Other Options Are Wrong
Option A: Client approval of the assumption instead of disclosure in the report
Option A, client approval of the assumption instead of disclosure in the report, is wrong because client consent does not remove the duty to disclose the assumption and its possible effect.
Option B: Removal of the assumption from the report once the client approves it
Option B, removal of the assumption from the report once the client approves it, is wrong because the report must state the extraordinary assumption; removing it would mislead intended users.
Option C: At least one supporting comparable sale instead of any disclosure
Option C, at least one supporting comparable sale instead of any disclosure, is wrong because USPAP imposes no one-comparable test and no substitute for the required disclosure.
State it, flag its effect
For an extraordinary assumption in a report, do two things: state it clearly and conspicuously, and say it might have affected the results.
How to use: Use this on questions asking how extraordinary assumptions or hypothetical conditions must be reported.
Exam Tip
Answers that swap disclosure for client approval or extra data miss the reporting requirement.
Common Mistakes to Avoid
- -Believing client approval removes the disclosure requirement
- -Burying the assumption in fine print
- -Omitting the statement that the assumption might have affected results
Concept Deep Dive
Analysis
This question tests the reporting requirement for an extraordinary assumption that already meets development conditions. The report must clearly and conspicuously state the extraordinary assumption and state that its use might have affected the assignment results. Client approval and comparable sales do not replace disclosure.
Background Knowledge
An extraordinary assumption is an assignment-specific assumption, as of the effective date, about uncertain information that, if found false, could alter the opinions or conclusions. Under SR 1-2(f), it may be used only if required to develop credible opinions, it has a reasonable basis, and its use results in credible analysis. The report then discloses it clearly and conspicuously.
Real-World Application
An appraiser cannot access a crawlspace and assumes, based on seller statements and the home's age, that the foundation is sound. The report states this extraordinary assumption prominently and notes that its use might have affected the assignment results.
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 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?
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?
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Previous Question
Under Fannie Mae's Selling Guide, a home has a sales comparison indication of $400,800 and a cost indication of $403,200. The appraiser's explained weighting (40% sales comparison, 60% cost) gives $402,240, and the appraiser usually rounds final values to the nearest $5,000. Which reporting choice is best?
Next Question
Under Fannie Mae's Selling Guide, an appraiser's sales comparison approach indicates $410,000 and the cost approach indicates $432,000. Believing that neither approach fully reflects recent upgrades, the appraiser wants to report a final value of $440,000. What does the Selling Guide require?