Under the Interagency Guidelines, what should an appraiser disclose when a valuation approach is omitted?
Correct Answer
B) The rationale for the omission
The appraisal must include any approach that is applicable and necessary to the assignment, and the appraiser should disclose the rationale for omitting a valuation approach.
Why This Is the Correct Answer
Option B is correct because the Interagency Guidelines state that the appraiser should disclose the rationale for the omission of a valuation approach. The appraisal must include any approach that is applicable and necessary to the assignment, so explaining why an approach was left out lets users understand and rely on the analysis.
Why the Other Options Are Wrong
Option A: Nothing, if the client agrees to the omission
Option A is wrong because it says nothing need be disclosed if the client agrees to the omission. Client agreement does not remove the expectation that the appraiser disclose the rationale for omitting an approach.
Option C: The fee reduction resulting from the omission
Option C is wrong because it calls for disclosing the fee reduction resulting from the omission. The guidelines address the reasoning for the omission, not any change in the appraisal fee.
Option D: The name of another appraiser who could complete it
Option D is wrong because it calls for naming another appraiser who could complete the omitted approach. The guidelines expect the appraiser to explain why the approach was omitted, not to refer the work elsewhere.
Omit it, explain it
If you leave an approach out, you owe the reader the reason. No approach disappears without an explanation.
How to use: Use 'omit it, explain it' to answer questions about omitted valuation approaches.
Exam Tip
When an approach is omitted, the expected disclosure is the reasoning for the omission. Options about fees, referrals or client consent miss the point.
Common Mistakes to Avoid
- -Believing client consent removes the need to explain an omission
- -Disclosing fees instead of reasoning
- -Omitting an approach without any explanation
Concept Deep Dive
Analysis
This question tests a disclosure expectation in the Interagency Appraisal and Evaluation Guidelines. When an appraiser omits a valuation approach, the reason for that decision should be disclosed. Client agreement, fees and referrals are not what the guidelines address.
Background Knowledge
The Interagency Appraisal and Evaluation Guidelines set expectations for appraisals used in federally regulated lending. Among them, an appraisal should include all approaches that are applicable and necessary, and any omission should be explained so that users can assess the credibility of the conclusion.
Real-World Application
An appraiser valuing a vacant residential lot does not develop the cost approach because there are no improvements. The report states that the cost approach was omitted because it is not applicable to vacant land, giving the lender a clear rationale.
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