Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
Correct Answer
C) Reasonably probable changes in land use regulations
SR 1-3(a) requires analysis of existing land use regulations, reasonably probable modifications of them, economic supply and demand, physical adaptability of the real estate, and market area trends. Borrower and lender items are not part of it.
Why This Is the Correct Answer
Option C is correct because SR 1-3(a) requires the appraiser, when necessary for credible results, to identify and analyze the effect on use and value of reasonably probable modifications of land use regulations. A likely rezoning or regulatory change can alter what the property may be used for and what buyers will pay. That makes it a property-level market factor within the rule.
Why the Other Options Are Wrong
Option A: The borrower’s ability to repay the mortgage loan
Option A, the borrower's ability to repay the mortgage loan, is a credit underwriting matter for the lender. It does not describe the use or value of the real estate and is not among the SR 1-3(a) items.
Option B: The lender’s required loan-to-value ratio for the loan
Option B, the lender's required loan-to-value ratio, is a lending policy term. It does not affect the property's market value and is not listed in SR 1-3(a).
Option D: The appraiser’s historical fee schedule for such work
Option D, the appraiser's historical fee schedule, concerns the appraiser's business, not the property or its market. Fees have no place in the analysis of use and value under SR 1-3(a).
Rules, Changes, Supply, Shape, Trends
Picture the property's story: the Rules that govern it now, likely Changes to those rules, Supply and demand, the physical Shape or adaptability of the site, and area Trends.
How to use: Use this sequence to check whether an answer choice is a property and market factor or an outside lending or business item.
Exam Tip
When a USPAP question asks what the appraiser must analyze about the market, choose the option about the property's use, regulation or market, not the borrower, lender or fee.
Common Mistakes to Avoid
- -Treating borrower credit as part of the market value analysis
- -Considering only existing zoning and ignoring reasonably probable changes
- -Mixing lender loan terms into the property's market analysis
Concept Deep Dive
Analysis
This question tests whether you know the market-related items listed in USPAP Standards Rule 1-3(a) for market value assignments. The rule focuses on factors that affect the use and value of the real estate itself, such as land use regulations and their reasonably probable modifications. Items tied to the loan, the borrower or the appraiser's business are outside that list.
Background Knowledge
SR 1-3(a) lists five items to identify and analyze when necessary for credible market value results: existing land use regulations, reasonably probable modifications of those regulations, economic supply and demand, physical adaptability of the real estate, and market area trends. These items support highest and best use and market analysis.
Real-World Application
An appraiser values a parcel zoned for single-family use while the city is actively considering a rezoning to mixed use. Because that modification is reasonably probable, the appraiser analyzes how it may affect buyers' expectations and the property's highest and best use.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
How does the Fannie Mae Selling Guide define a neighborhood?
Several homes in a neighborhood are vacant and boarded up. Which market force does Fannie Mae classify this as?
Infrastructure investment such as a new interchange typically affects nearby land by:
A city raises property tax rates and tightens building regulations. Which market force does Fannie Mae classify these as?
An appraiser believes, without market evidence, that a nearby group home lowers values. What does Fannie Mae require?
Which three categories are used to report the supply of properties in a Fannie Mae neighborhood section?
An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
Can mixed land uses in a residential neighborhood ever enhance home values, according to Fannie Mae?
In Mueller’s occupancy-based four-phase real-estate cycle framework, which phase describes falling occupancy as continuing supply growth overtakes demand?
People Also Study
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
Income Approach
8.2% of exam
Previous Question
A property is said to have functional utility when:
Next Question
A builder's subdivision sold quickly at prices well above cost. Within two years, three competing builders opened subdivisions nearby with similar homes, buyer demand held steady, and the original builder had to cut prices on its remaining homes. Which principle best explains the price cuts?