In a federally related transaction, an appraiser discovers that the subject property has significant undisclosed structural damage that affects its value by $75,000. According to USPAP, the appraiser must:
Correct Answer
D) Disclose the condition and analyze its effect on the value opinion
A material observed condition belongs in the appraisal analysis and, as relevant, in the report. The appraiser should investigate or use qualified information as needed to develop a credible value opinion; the effect on market value is not necessarily equal to a repair estimate. USPAP does not generally impose the listed borrower-notification or building-code enforcement duties.
Why This Is the Correct Answer
Option D is correct because a material observed condition belongs in the appraisal analysis and, as relevant, in the report. The market value estimate should consider the property's actual physical condition as of the effective date. The appraiser investigates or relies on qualified information as needed, recognizing that the effect on market value is not necessarily equal to a repair estimate.
Why the Other Options Are Wrong
Option A: Report the condition to building authorities as a USPAP duty
Option A treats reporting the condition to building authorities as a USPAP duty. USPAP does not generally impose building-code enforcement or reporting duties on appraisers.
Option B: Notify the borrower instead of the client
Option B would notify the borrower instead of the client. The appraiser's obligations run to the client and intended users, and USPAP does not generally impose a borrower-notification duty; confidentiality rules also limit disclosure of assignment results.
Option C: Withdraw, since damaged properties cannot be appraised
Option C says to withdraw because damaged properties cannot be appraised. Damaged properties can be appraised; the appraiser analyzes the condition's effect on value rather than declining for that reason alone.
See It, Analyze It, Report It
A material condition the appraiser observes goes into the analysis and the report. The appraiser is not a code inspector or the borrower's messenger.
How to use: Use this when a question offers enforcement or third-party notification as the appraiser's duty for a discovered defect.
Exam Tip
Choose the option that keeps the condition inside the appraisal analysis and report. Options assigning police or messenger roles to the appraiser are usually distractors.
Common Mistakes to Avoid
- -Assuming the value effect equals the repair cost estimate
- -Believing the appraiser must report code problems to authorities under USPAP
- -Thinking damaged properties cannot be appraised
Concept Deep Dive
Analysis
This question tests how an appraiser handles a material physical condition discovered during an assignment. The market value estimate must consider the property's actual physical condition as of the effective date. The right response is to analyze and disclose the condition, not to take on enforcement or notification roles USPAP does not impose.
Background Knowledge
Market value reflects a property's actual physical condition, use and zoning as of the effective date. When a significant defect is observed, the appraiser considers its effect on value and may rely on qualified specialists for repair or structural information. The market reaction to a defect can differ from the cost to cure it.
Real-World Application
During an inspection for a purchase loan, an appraiser notices a cracked foundation wall and sloping floors that the listing did not mention. The appraiser describes the condition, recommends a structural engineer's evaluation and considers how buyers in the market would react. The report explains how the condition was reflected in the value opinion.
More USPAP Questions
An appraiser signs, finalizes and electronically transmits a residential appraisal report to the client on March 15. Its value opinion has a March 1 effective date. The client does not open the transmitted report until March 20. What is the report date?
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According to AQB criteria, what is the minimum number of classroom hours of qualifying education required for a Certified Residential appraiser?
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After delivering a $485,000 URAR, an appraiser discovers a previously undisclosed $15,000 seller repair credit on a comparable sale that may materially change the analysis. What is the most appropriate response?
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A state appraiser regulatory agency is reviewing an appraiser's continuing education compliance. The appraiser completed 28 hours of continuing education in the current two-year period, including 5 hours of USPAP update training. Does this meet AQB requirements?
According to USPAP Standard 2, which of the following is NOT a required element in an appraisal report?
A client asks an appraiser to raise a completed report’s value conclusion by $15,000 solely to match the contract price, without providing new evidence. What should the appraiser do?
A comparable-sale grid includes a $5,000 bathroom adjustment. Which treatment best supports clear appraisal reporting?
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