The effective date of an appraisal differs from the report date in that the effective date:
Correct Answer
B) Establishes the point in time to which the value opinion applies
The effective date identifies the point in time to which the value opinion applies. It may differ from the inspection date or the date the report is completed and communicated. The assignment may call for current, retrospective or prospective value; the intended use and valuation problem determine the appropriate date. A lender’s anticipated closing date does not automatically determine it, and it is not an expiration date for client action.
Why This Is the Correct Answer
Option B is correct because USPAP defines the effective date as the date to which an appraiser's analyses, opinions and conclusions apply, also referred to as the date of value. That is the point in time the value opinion applies to. It can be current, retrospective or prospective depending on the assignment.
Why the Other Options Are Wrong
Option A: Is the calendar day on which the appraiser signs the report
Option A says the effective date is the calendar day the appraiser signs the report. That describes the report date; the effective date is the date the value applies to, which may differ from the signing date.
Option C: Marks the deadline by which the client must act on the conclusion
Option C says it marks the deadline by which the client must act on the conclusion. The effective date is not an expiration date for client action; it identifies the date of value.
Option D: Is set by the lender to match the anticipated loan closing schedule
Option D says the lender sets it to match the anticipated loan closing schedule. A lender's closing date does not by itself determine the effective date; the intended use and valuation problem determine it.
Effective date equals date of value
Effective date answers when is the value; report date answers when was it written.
How to use: Use this when a question contrasts the effective date with the report or inspection date.
Exam Tip
If an option ties the effective date to signing, deadlines or a lender schedule, check whether it describes the date of value; if not, eliminate it.
Common Mistakes to Avoid
- -Treating the signing date as the effective date
- -Thinking the effective date is an expiration date
- -Assuming the lender's closing date sets the effective date
Concept Deep Dive
Analysis
This question tests the difference between the effective date and the report date. The effective date is the date to which the analyses, opinions and conclusions apply, also called the date of value. The report date is when the report is completed, so they can differ.
Background Knowledge
An appraisal's effective date ties the value to market conditions at a specific time. The report date shows when the report was prepared and helps readers understand the perspective of the appraisal. Retrospective and prospective appraisals have effective dates before or after the report date.
Real-World Application
An estate attorney asks for the market value of a home as of the owner's date of death eight months ago. The appraiser prepares the report today with a retrospective effective date matching the date of death. The report date and effective date are different, and both are stated.
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