Under 2024 USPAP Standards Rule 2-2(a)(xiii) (Appraisal Report content), when extraordinary assumptions or hypothetical conditions are used in an assignment, what must the report clearly and conspicuously do?
Correct Answer
B) State all extraordinary assumptions and hypothetical conditions and that their use may affect results
For an Appraisal Report, clearly and conspicuously state the extraordinary assumptions and hypothetical conditions used, and state that their use might have affected the results. Workfile-only disclosure does not satisfy that reporting duty. Their use does not automatically require reporting a value range.
Why This Is the Correct Answer
Option B is correct because Standards Rule 2-2(a)(xiii) requires an Appraisal Report to clearly and conspicuously state all extraordinary assumptions and hypothetical conditions and state that their use might have affected the assignment results. Both elements must appear in the report itself so users understand how the conclusions depend on them.
Why the Other Options Are Wrong
Option A: Omit extraordinary assumptions from the report so users are not confused by uncertain facts
Option A is wrong because omitting extraordinary assumptions from the report hides information users need. The rule requires these assumptions to be stated clearly and conspicuously, not left out to avoid confusion.
Option C: Disclose extraordinary assumptions only in the workfile, since the report need not mention them
Option C is wrong because disclosing extraordinary assumptions only in the workfile does not meet the reporting requirement. The report itself must state them and their possible effect on the results.
Option D: Replace the value opinion with a range whenever any extraordinary assumption is used in it
Option D is wrong because using an extraordinary assumption does not require replacing the value opinion with a range. The requirement is disclosure of the assumption and its possible effect, not a change in the form of the opinion.
State it, flag it
For each extraordinary assumption or hypothetical condition, state it in the report and flag that it might have affected the results.
How to use: Use this to recall the two required parts of the disclosure.
Exam Tip
Look for the option that includes both the statement of the assumptions and the statement that their use might have affected results. Options that move disclosure to the workfile miss the reporting duty.
Common Mistakes to Avoid
- -Keeping extraordinary assumptions only in the workfile
- -Stating the assumptions but omitting that they might have affected results
- -Believing an extraordinary assumption forces a range instead of a point value
Concept Deep Dive
Analysis
This question tests a specific USPAP reporting requirement for an Appraisal Report. Standards Rule 2-2(a)(xiii) requires the report to clearly and conspicuously state all extraordinary assumptions and hypothetical conditions and to state that their use might have affected the assignment results. The correct choice includes both statements.
Background Knowledge
An extraordinary assumption treats uncertain information as fact, and a hypothetical condition treats known-false information as true for analysis. Because either can change the results, USPAP requires prominent disclosure. The workfile supports the report but does not substitute for required report content.
Real-World Application
An appraiser cannot access a crawlspace and assumes it is free of structural defects. The report clearly states this extraordinary assumption and that its use might have affected the assignment results, so the lender understands the condition behind the value.
More Reconciliation Questions
In a cost approach for an improved property, an appraiser estimates site value by sales comparison, allocation and extraction, then settles on one site-value figure before final reconciliation. How is this step best described?
An extraordinary assumption was reasonably supported, properly used and disclosed in an appraisal report. Later, the assumed information is found to be false. Which conclusion is best supported?
An otherwise applicable valuation approach cannot be developed reliably from the available data. The remaining scope can produce credible assignment results. What should the appraiser do?
May an appraiser use a hypothetical condition in any assignment?
An appraisal has a current effective date and permits an extraordinary assumption if its requirements are met. Which situation involves uncertain information rather than a fact known to be contrary to reality on that date?
Why must a report identify any real property interest that is being excluded from the value opinion?
Which review best helps explain divergent cost, sales-comparison and income indications?
Two value indications are $340,000 and $392,000. What is the difference as a percentage of the lower indication, rounded to one decimal place?
An unauthorized third party requests a lender-client’s report. No due-process or other permitted disclosure exception applies. How should the appraiser respond?
An appraiser proposes to assume there are no hidden defects. Which fact would characterize that assumption as extraordinary under the USPAP 2024 definition, rather than justify dismissing it as routine boilerplate?
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