Under USPAP Standard 2, an appraiser must include which of the following when reporting extraordinary assumptions?
Correct Answer
B) The assumption and a statement that its use might have affected the assignment results
USPAP Standard 2 requires that when reporting extraordinary assumptions, the appraiser must state the assumption and include a statement that the use of the extraordinary assumption might have affected the assignment results. This ensures transparency about potential impacts on credibility.
Why This Is the Correct Answer
Option B correctly identifies both required elements under USPAP Standard 2: the extraordinary assumption itself and the mandatory impact statement. The impact statement specifically must indicate that the use of the extraordinary assumption might have affected the assignment results. This dual requirement ensures full transparency and compliance with USPAP's credibility standards. The standard explicitly requires this warning language to alert appraisal users about potential reliability issues.
Why the Other Options Are Wrong
Option A: Only the assumption itself
Option A is incomplete because it only requires stating the assumption itself, omitting the mandatory impact statement that warns users about potential effects on assignment results.
Option C: The assumption and three comparable scenarios
Option C incorrectly suggests that three comparable scenarios must be provided, which is not a USPAP Standard 2 requirement for reporting extraordinary assumptions.
Option D: The assumption and the client's written approval
Option D incorrectly focuses on client approval rather than the required impact statement, and client approval is not a reporting requirement under USPAP Standard 2.
The EA Double Duty Rule
Remember 'EA = Extraordinary Assumption requires Double Duty: State it + Warn about it.' The appraiser must do BOTH jobs - state the assumption AND warn that it might have affected results.
How to use: When you see questions about reporting extraordinary assumptions, immediately think 'Double Duty' - look for the answer that includes both the assumption disclosure AND the impact warning statement.
Exam Tip
Look for answer choices that include both components: the assumption itself PLUS language about potential impact on results. Avoid answers that only mention one component or add irrelevant requirements.
Common Mistakes to Avoid
- -Thinking only the assumption needs to be stated without the impact warning
- -Confusing extraordinary assumptions with hypothetical conditions reporting requirements
- -Believing client approval is required for reporting extraordinary assumptions
Concept Deep Dive
Analysis
USPAP Standard 2 governs appraisal reporting requirements and mandates specific disclosure protocols for extraordinary assumptions. An extraordinary assumption is a supposition that, if found to be false, could alter the appraiser's opinions or conclusions. The standard requires not just disclosure of the assumption itself, but also a clear warning about its potential impact on the assignment results. This dual requirement ensures transparency and helps users understand the conditional nature of the appraisal conclusions. The purpose is to maintain credibility while alerting readers that the reliability of the appraisal may be affected if the assumption proves incorrect.
Background Knowledge
USPAP Standard 2 establishes comprehensive reporting requirements for real estate appraisals, including specific protocols for disclosing extraordinary assumptions. Students must understand that extraordinary assumptions are suppositions that could materially affect the appraisal if proven false, requiring both disclosure and impact warnings.
Real-World Application
When appraising a property with potential environmental contamination, an appraiser might make an extraordinary assumption that no contamination exists. The report must state this assumption clearly and include a statement that if contamination is later discovered, it might materially affect the property value conclusion.
More Report Writing Questions
Under FIRREA, which federal agency has the authority to set minimum standards for real estate appraisals in federally related transactions?
What is the minimum transaction threshold for requiring a state licensed or certified appraiser under Title XI for most federally related transactions?
The Dodd-Frank Act established which requirement specifically related to appraisal independence?
Which of the following is NOT a responsibility of the Appraisal Subcommittee (ASC)?
State appraiser regulatory agencies are primarily responsible for which of the following functions?
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