A client requests an appraisal of a specified property interest for an assignment using a value basis other than market value. What must the appraiser identify?
Correct Answer
A) The type and definition of value applicable to the assignment
SR 1-2 requires identification of the type and definition of value. Different definitions can require different assumptions and analyses, so the appraiser must establish the applicable basis for the actual assignment. A lender, unusual intended use, or confidentiality concern does not remove that identification requirement, and an asking price is not a substitute for defining the value being developed.
Why This Is the Correct Answer
Option A is correct because SR 1-2(c) requires the appraiser to identify the type and definition of value for the assignment. When the assignment uses a basis other than market value, the appraiser must identify that basis and its definition rather than defaulting to market value. That identification guides the data, assumptions, and methods used.
Why the Other Options Are Wrong
Option B: Market value, since it is the default for each assignment
Option B says to identify market value because it is the default for each assignment. USPAP has no default value type; here the client requested a different value basis, and the appraiser must identify the type and definition that actually apply.
Option C: The property’s most recent asking price on the market
Option C says to identify the property's most recent asking price. An asking price is a market data point, not a type or definition of value, and it cannot substitute for defining the value being developed.
Option D: A confidentiality label in place of a value definition
Option D says to use a confidentiality label in place of a value definition. Confidentiality concerns do not remove the duty to identify the type and definition of value.
Name it, define it
Before valuing, name the type of value and state its definition. No name and no definition means the problem is not identified.
How to use: Use this when a question asks what must be identified about the value being developed.
Exam Tip
Market value is common but not assumed; when a question says the basis is something else, choose the answer that identifies the applicable type and definition.
Common Mistakes to Avoid
- -Assuming market value applies to every assignment
- -Using an asking price in place of a value definition
- -Skipping the definition when the client has unusual needs
Concept Deep Dive
Analysis
This question tests SR 1-2(c), which requires the appraiser to identify the type and definition of value. Because the client wants a value basis other than market value, the appraiser must establish which type of value and which definition apply to this assignment. Different definitions can call for different assumptions and analyses, so this step shapes the whole appraisal.
Background Knowledge
Common value types include market value, investment value, liquidation value, insurable value, and use value. Each has its own definition and premises, and USPAP cautions appraisers to identify the exact definition and its authority. Getting this step right is part of problem identification under SR 1-2.
Real-World Application
An investor asks an appraiser for the value of a rental house to that investor's specific requirements. The appraiser identifies the assignment as investment value, states the definition used, and develops the analysis around the investor's criteria rather than typical market participants.
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