Standards Rule 1-3 requires the appraiser, when necessary for credible results, to:
Correct Answer
A) Analyze market and land-use factors to support highest and best use
When necessary for credible results, SR 1-3 requires analysis of relevant land-use regulation, supply and demand, physical adaptability and market-area trends, and a supported highest-and-best-use opinion. A fixed photograph count or an occupant interview is not a universal substitute for that analysis.
Why This Is the Correct Answer
Option A is correct because SR 1-3 requires the appraiser, when necessary for credible results, to analyze existing land use regulations, reasonably probable modifications of them, economic supply and demand, physical adaptability and market area trends. It also requires the appraiser to develop an opinion of the highest and best use of the real estate.
Why the Other Options Are Wrong
Option B: Interview each occupant of the subject property about its history
Option B requires interviewing each occupant about the property's history. SR 1-3 contains no occupant-interview requirement; it focuses on market and land-use analysis and highest and best use.
Option C: Photograph each comparable sale from four different angles
Option C requires photographing each comparable sale from four angles. SR 1-3 sets no photograph count; it addresses analysis of factors affecting use and value.
Option D: Substitute the client’s proposed loan terms for any market analysis
Option D substitutes the client's proposed loan terms for market analysis. Loan terms do not replace the market and land-use analysis that SR 1-3 calls for.
Market feeds highest use
SR 1-3 pairs two tasks: analyze the market and land-use factors, then form the highest and best use opinion.
How to use: Use this pairing to recognize SR 1-3 when a question lists development requirements.
Exam Tip
When a question cites SR 1-3, look for highest and best use and its supporting market analysis.
Common Mistakes to Avoid
- -Confusing SR 1-3 with SR 1-4 approach requirements
- -Thinking USPAP prescribes photo counts for comparables
- -Letting client loan terms replace market analysis
Concept Deep Dive
Analysis
This question tests the content of Standards Rule 1-3. When necessary for credible results, the rule requires analysis of factors affecting use and value and the development of a highest and best use opinion. The wrong options describe tasks the rule does not require.
Background Knowledge
Standards Rule 1-3 links market analysis to highest and best use. Land use regulations, supply and demand, physical adaptability and market area trends all shape what use is legally permissible, physically possible, financially feasible and maximally productive.
Real-World Application
An appraiser values an older house on a lot recently rezoned for townhomes. She analyzes the new zoning, demand for townhomes and market trends, and concludes whether continued residential use or redevelopment is the highest and best use.
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