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) Include the condition in the report and adjust the value accordingly
Why this is correct: USPAP requires appraisers to report observed conditions that materially affect value and to incorporate them into the valuation. The appraiser must adjust the value opinion based on the discovered structural damage. Why the other choices are wrong: "Report the condition to local building authorities" is not the appraiser's role; the appraiser provides valuation, not enforcement. "Immediately notify the borrower about the damage" is not required under USPAP; communication is typically with the client. "Refuse to complete the appraisal due to the undisclosed condition" is unnecessary; the appraiser can complete the appraisal by adjusting for the condition. Exam tip: Your duty is to value the property as-is based on observed conditions, not to investigate or enforce building codes.
Why This Is the Correct Answer
Option B correctly reflects USPAP requirements for handling observed conditions that affect value. The appraiser must document the structural damage in the appraisal report and make appropriate adjustments to reflect how this condition impacts market value. This maintains the appraiser's role as an objective analyst while ensuring the client receives accurate information about the property's condition and value. The appraiser fulfills their professional obligation by incorporating observed conditions into their valuation analysis.
Why the Other Options Are Wrong
ROAD Method
R-Report what you observe, O-Objective analysis only, A-Adjust value accordingly, D-Don't exceed your role
How to use: When facing questions about discovered property conditions, apply ROAD: Report the condition, maintain Objective stance, Adjust the valuation, and Don't step outside the appraiser role into inspection or enforcement.
Exam Tip
Remember that appraisers observe and report conditions that affect value, but they don't inspect, enforce, or advocate - stick to valuation analysis only.
Common Mistakes to Avoid
- -Thinking appraisers must refuse assignments when finding undisclosed conditions
- -Believing appraisers should contact parties other than their client
- -Assuming appraisers have enforcement or inspection authority beyond valuation
Concept Deep Dive
Analysis
This question tests understanding of the appraiser's professional responsibilities under USPAP when discovering conditions that materially affect property value. The core principle is that appraisers must maintain objectivity and report what they observe without overstepping their professional boundaries. USPAP requires appraisers to identify and analyze property conditions that impact value, but does not authorize them to act as inspectors, enforcement agents, or advocates for any party. The appraiser's primary duty is to provide credible assignment results based on observed conditions.
Background Knowledge
USPAP establishes that appraisers must report observed conditions affecting value while maintaining independence and objectivity. The appraiser's role is limited to valuation analysis, not inspection, enforcement, or advocacy for any party in the transaction.
Real-World Application
When an appraiser notices foundation cracks during a walkthrough, they document this observation in their report, research how similar structural issues affect market value, and adjust their valuation accordingly, but they don't recommend repairs or contact building departments.
More USPAP Questions
An appraiser is analyzing three comparable sales with the following data: Sale 1: $350,000 with +$10,000 adjustments; Sale 2: $340,000 with -$5,000 adjustments; Sale 3: $360,000 with -$15,000 adjustments. What are the adjusted sale prices?
A lender orders an appraisal for a $300,000 residential loan. After receiving the appraisal, the loan officer contacts the appraiser requesting that certain language be changed to better support the loan approval. This scenario represents a violation of:
How often must appraisers complete continuing education to maintain their license or certification?
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Under the Dodd-Frank Act, which entity is responsible for establishing appraisal standards for federally related transactions?
In the URAR form, what does the appraiser indicate in the 'Subject' column for site size?
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