A tax assessment shows a value for the subject. Why can the appraiser not automatically adopt it as the market-value conclusion for a new lending assignment?
Correct Answer
C) Its value basis, date, methods, data and fit for the assignment must first be evaluated
Assessment systems differ in valuation basis, ratios, dates, and methods. Some assessment work is USPAP-compliant appraisal, including mass appraisal; the tax label does not prove otherwise. Nevertheless, an assessed number does not by itself establish a credible value opinion or satisfy reporting and development duties for a different assignment. Evaluate its actual basis, limitations, and applicability rather than automatically adopting or dismissing it.
Why This Is the Correct Answer
Option C is correct because the assessment's value basis, effective date, methods, property information and fit for the assignment must first be evaluated. An assessed number does not by itself establish a credible value opinion for a different assignment. USPAP requires the appraiser to collect, verify and analyze all information necessary for credible results.
Why the Other Options Are Wrong
Option A: Tax assessments are not developed under USPAP, so they cannot be considered at all
Option A is wrong because it says tax assessments are not developed under USPAP and cannot be considered at all. Some assessment work is USPAP-compliant mass appraisal, and an assessment can be considered as information once evaluated.
Option B: A 100% assessment ratio satisfies lending-appraisal requirements, so the figure can be adopted
Option B is wrong because it says a 100% assessment ratio satisfies lending-appraisal requirements. Even at full assessment, the figure's date, methods and data may not fit the assignment, and it does not satisfy the appraiser's development duties.
Option D: Assessment figures are higher than market value in this jurisdiction, so they must be reduced
Option D is wrong because it asserts that assessment figures are higher than market value in this jurisdiction and must be reduced. Nothing in the facts supports that claim, and mechanically reducing the figure still skips the required evaluation.
Assessed is not appraised
An assessment was made for taxes, at its own date and by its own methods. Check how it was made before letting it inform your opinion.
How to use: Use this when a question offers an assessed value as a shortcut to market value.
Exam Tip
Avoid both extremes: answers that adopt an assessment outright and answers that refuse to consider it at all are usually wrong.
Common Mistakes to Avoid
- -Assuming all tax assessments are non-USPAP and must be ignored
- -Adopting an assessed value as market value because of a full assessment ratio
- -Applying a blanket reduction to assessments without evidence
Concept Deep Dive
Analysis
This question tests why an assessed value cannot simply be adopted as a market-value conclusion. Assessments differ in valuation basis, ratios, dates and methods, so the appraiser must evaluate them before giving them any weight. The correct approach neither automatically adopts nor automatically dismisses the figure.
Background Knowledge
Property tax assessments are often produced by mass appraisal for a different purpose and date than a lending assignment. Assessment ratios, valuation dates and data quality vary, so an assessed value is at most one piece of information to evaluate.
Real-World Application
A borrower points to the county's assessed value as proof of the home's worth. The appraiser notes the assessment's valuation date was two years earlier and that the record omits a recent addition, so it is given little weight compared with current sales.
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