What does USPAP say about assumptions concerning market area trends, effective age and remaining life?
Correct Answer
D) The appraiser must avoid unsupported assumptions about them
The comment to SR 1-3 states that an appraiser must avoid making an unsupported assumption or premise about market area trends, effective age and remaining life.
Why This Is the Correct Answer
Option D is correct because the comment to SR 1-3 states that an appraiser must avoid making an unsupported assumption or premise about market area trends, effective age and remaining life. These conclusions need support from data and analysis.
Why the Other Options Are Wrong
Option A: They may be assumed if the client agrees in writing
Option A says these items may be assumed if the client agrees in writing. Client agreement does not provide support; USPAP requires the appraiser to avoid unsupported assumptions about them.
Option B: They must be taken from the lender’s published guidelines
Option B says they must be taken from the lender's published guidelines. USPAP calls for the appraiser's supported analysis, not a requirement to adopt lender figures.
Option C: They apply to income-producing property, but not to homes
Option C limits the requirement to income-producing property and excludes homes. The comment is not limited by property type, and these items commonly matter in residential appraisals.
Trends, age, life need proof
Market trends, effective age and remaining life each need evidence behind them, not guesses.
How to use: Use this phrase when a question asks how USPAP treats assumptions about these three items.
Exam Tip
Client consent or lender preference does not turn an unsupported assumption into a supported one.
Common Mistakes to Avoid
- -Thinking client approval permits unsupported assumptions
- -Believing the rule applies only to income property
- -Adopting lender figures without independent support
Concept Deep Dive
Analysis
This question tests a USPAP requirement in the comment to SR 1-3 about market area trends, effective age and remaining life. These items must be supported by analysis rather than assumed. Choose the option that requires avoiding unsupported assumptions.
Background Knowledge
SR 1-3 addresses analysis of factors such as market area trends and highest and best use in real property appraisal development. Effective age and remaining life affect depreciation estimates, so unsupported assumptions about them can undermine credibility.
Real-World Application
An appraiser is tempted to state that values in the area are stable without checking data. Instead, she reviews recent sales and listing trends and supports her market-trend conclusion in the report.
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