Which situation calls for an extraordinary assumption rather than a hypothetical condition?
Correct Answer
C) Assuming an unverified square footage is accurate
Why this is correct: An extraordinary assumption is used for something that is uncertain but could be true, while a hypothetical condition is used for something known to be false on the effective date. Assuming an unverified square footage is accurate deals with an uncertain fact, making it an extraordinary assumption. Why the other choices are wrong: Valuing land as though a planned building existed, valuing a property as though rezoning had occurred, and valuing a partial interest as though it were whole all involve scenarios the appraiser knows are not true as of the effective date, so they are hypothetical conditions. Exam tip: Remember: "Could it be true but we don't know?" = extraordinary assumption. "We know it's false right now?" = hypothetical condition.
Why This Is the Correct Answer
Why this is correct: An extraordinary assumption is used for something that is uncertain but could be true, while a hypothetical condition is used for something known to be false on the effective date. Assuming an unverified square footage is accurate deals with an uncertain fact, making it an extraordinary assumption. Why the other choices are wrong: Valuing land as though a planned building existed, valuing a property as though rezoning had occurred, and valuing a partial interest as though it were whole all involve scenarios the appraiser knows are not true as of the effective date, so they are hypothetical conditions. Exam tip: Remember: "Could it be true but we don't know?" = extraordinary assumption. "We know it's false right now?" = hypothetical condition.
More USPAP Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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