When an appraisal includes nonrealty assets, what does SR 1-4(g) require?
Correct Answer
B) Analyze their effect on value, with added competency if valued
When the appraisal includes personal property, trade fixtures or intangible assets, analyze their effect on value. If the scope includes valuing those assets themselves, obtain the relevant personal-property or business-appraisal competence and apply the applicable Standards; a real-property credential alone does not establish all necessary competence.
Why This Is the Correct Answer
Option B is correct because SR 1-4(g) requires the appraiser to analyze the effect on value of non-real property assets. The comment adds that when the scope includes appraising personal property, trade fixtures or intangible assets, competency in personal property appraisal (STANDARD 7) or business appraisal (STANDARD 9) is required. A real property credential alone does not supply that competency.
Why the Other Options Are Wrong
Option A: Ignore them whenever the report describes the property as is
Option A is wrong because describing the property as is does not permit ignoring nonrealty assets; SR 1-4(g) requires analyzing their effect on value.
Option C: Value them at their original invoice cost, as documented
Option C is wrong because the rule does not direct valuing nonrealty assets at their original invoice cost; it requires analyzing their effect on value, and cost is not the same as value.
Option D: Apply the requirement to restricted reports, not other options
Option D is wrong because SR 1-4(g) is a development requirement and does not apply only to restricted reports; it applies whenever the appraisal includes such assets.
Analyze effect; value needs competency
Nonrealty in the deal means analyze its effect on value. Putting a separate value on it means bringing personal property or business competency.
How to use: Use this when a question involves furniture, fixtures or intangibles in a real property appraisal.
Exam Tip
Development rules in STANDARD 1 apply regardless of the reporting option chosen, so options tying them to one report type deserve skepticism.
Common Mistakes to Avoid
- -Ignoring furniture and equipment included in a sale
- -Using invoice cost as the value of personal property
- -Assuming a real property license covers business valuation
Concept Deep Dive
Analysis
This question tests SR 1-4(g) on personal property, trade fixtures and intangible assets included in an appraisal. The appraiser must analyze their effect on value. If the scope includes valuing them, the appraiser also needs personal property or business appraisal competency.
Background Knowledge
Some real property appraisals include items that are not real estate, such as furniture, equipment or business intangibles. USPAP requires the appraiser to analyze how these affect the value conclusion. Valuing the items themselves calls for competency under STANDARD 7 or STANDARD 9.
Real-World Application
An appraiser values a furnished vacation home whose sale includes furniture, a golf cart and a boat. The appraiser analyzes how these items affect the value and, if asked to value them separately, makes sure the necessary personal property valuation competency is in place.
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