A client requests analysis under a premise contrary to known effective-date facts. What must the appraiser do?
Correct Answer
C) Treat it as a hypothetical condition and use it only if permitted
Identify any necessary hypothetical condition and determine whether its use meets SR 1-2(g)’s requirements. A lender client or confidentiality label does not excuse that step; clear reporting is an additional duty rather than permission to use any requested fiction.
Why This Is the Correct Answer
Option C is correct because a premise contrary to known effective-date facts is a hypothetical condition, and SR 1-2(g) says a hypothetical condition may be used only if its conditions are met. The appraiser must identify it and determine whether its use is permitted before proceeding, and then report it clearly.
Why the Other Options Are Wrong
Option A: Accept the premise without comment because the client is a lender
Option A is wrong because accepting the premise without comment because the client is a lender skips the required identification and permission test. A lender client does not excuse that step, and the premise would also need clear disclosure.
Option B: Label the report confidential instead of addressing the premise
Option B is wrong because labeling the report confidential instead of addressing the premise does nothing to determine whether the hypothetical condition can be used. Confidentiality is unrelated to the SR 1-2(g) requirements.
Option D: Proceed because client consent alone satisfies USPAP for any premise
Option D is wrong because client consent alone does not satisfy USPAP for any premise. A hypothetical condition must meet the SR 1-2(g) conditions, including being clearly required for a recognized purpose and resulting in a credible analysis.
Contrary to fact means test first
When a premise contradicts known facts, label it a hypothetical condition and run the SR 1-2(g) test before using it.
How to use: Use this when a client asks you to assume something you know is not true on the effective date.
Exam Tip
Answers that rely on client wishes, lender status or confidentiality to justify a premise are distractors; look for the permission test.
Common Mistakes to Avoid
- -Treating client consent as sufficient for any premise
- -Confusing a hypothetical condition with an extraordinary assumption
- -Thinking reporting the premise alone makes its use acceptable
Concept Deep Dive
Analysis
This question tests how to handle a client-requested premise that is contrary to known facts as of the effective date. Such a premise is a hypothetical condition, and SR 1-2(g) allows its use only when stated conditions are met. Client type, consent or a confidentiality label does not substitute for that analysis.
Background Knowledge
A hypothetical condition is contrary to what the appraiser knows exists on the effective date but is used for analysis. It may be used only when clearly required for legal purposes, reasonable analysis or comparison, and when it results in credible analysis. Reporting requirements are an additional duty, not permission to use any requested fiction.
Real-World Application
A lender asks for the value of a house as if a known roof leak had already been repaired as of today. The appraiser recognizes this as a hypothetical condition and confirms it is needed for reasonable analysis and would produce a credible result. The report then clearly states the hypothetical condition and that it might have affected the results.
More USPAP Questions
Under USPAP, what are assignment results?
The certification required by Standards Rule 2-3 must be signed by:
Under 2024 USPAP, which statement correctly combines the requirements for an oral real property appraisal report and its workfile?
An appraiser accepts an assignment involving a property type the appraiser has valued once before, years ago. Competency requires:
A Certified General appraiser is asked to value a specialized industrial property for the first time. The appraiser knows a competency gap exists before agreeing to the assignment. What is required if the appraiser proceeds?
Under 2024 USPAP Standard 1, which listed assignment element must be identified in developing a real property appraisal?
An appraiser provided an appraisal of the same property for another client 18 months ago. No confidentiality obligation prevents disclosing the fact of that service. Before agreeing to a new assignment, the appraiser must:
According to USPAP, what is the primary purpose of the Ethics Rule?
An appraiser is asked to determine 'fair market value' for an assignment. According to USPAP, the appraiser should:
Which list gives the sections of the 2024 USPAP Ethics Rule?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam