When may an extraordinary assumption be used under SR 1-2(f)?
Correct Answer
D) When required for credible results, reasonably based and credible
Identify any necessary extraordinary assumption. Its use needs a reasonable basis, must be required to properly develop credible opinions and conclusions, and must produce credible analysis. Clear reporting is an additional duty; a restricted format does not waive these conditions.
Why This Is the Correct Answer
Option D is correct because SR 1-2(f) permits an extraordinary assumption only if it is required to properly develop credible opinions and conclusions, the appraiser has a reasonable basis for it, and its use results in a credible analysis. The option summarizes all three conditions.
Why the Other Options Are Wrong
Option A: Whenever the client requests a cheaper or faster scope of work
Option A is wrong because a client's request for a cheaper or faster scope of work is not a basis for an extraordinary assumption. The assumption must be required for credible results, not for convenience.
Option B: Whenever it is disclosed, with or without a reasonable basis
Option B is wrong because disclosure without a reasonable basis does not meet SR 1-2(f). A reasonable basis is a required condition, and disclosure is an additional duty rather than a replacement.
Option C: In mass appraisals, but not in single-property assignments
Option C is wrong because SR 1-2(f) is not limited to mass appraisals; it applies to real property appraisal development, including single-property assignments. The use conditions do not depend on the number of properties.
Required, reasonable, credible
An extraordinary assumption must be required, have a reasonable basis and lead to a credible analysis.
How to use: Use these three words to test each answer on extraordinary assumption questions.
Exam Tip
Answers built on client convenience or disclosure alone are distractors; look for all three conditions.
Common Mistakes to Avoid
- -Using an extraordinary assumption to save time or cost
- -Believing disclosure alone makes any assumption acceptable
- -Thinking the conditions apply only to certain assignment types
Concept Deep Dive
Analysis
This question tests the three conditions for using an extraordinary assumption under SR 1-2(f). It must be required to properly develop credible opinions, the appraiser must have a reasonable basis for it, and its use must result in credible analysis. Disclosure is a separate reporting duty, not a substitute for these conditions.
Background Knowledge
Extraordinary assumptions address uncertain information, such as the condition of an area that could not be inspected. Because a false assumption could change conclusions, USPAP limits use to cases that meet the three conditions. Reports must clearly state the assumption and that its use might have affected results, and a restricted report format does not waive the conditions.
Real-World Application
An appraiser cannot access a locked basement but sees recent permits and photos showing it was finished. The appraiser assumes the basement is finished as an extraordinary assumption, which is needed for a credible result and has a reasonable basis. The report states the assumption and that it might have affected the value.
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