USPAP Appraisal Development Standards Flashcards

Under USPAP, an 'extraordinary assumption' is defined as an assumption that:

Answer: If found to be false, could alter the appraiser's opinions or conclusions

An extraordinary assumption is one that assumes a condition as true that, if found to be false, could materially change the appraisal's conclusions.

Under USPAP, a 'hypothetical condition' differs from an extraordinary assumption in that it:

Answer: Is contrary to what exists but is used for the purposes of analysis

A hypothetical condition is one that is contrary to known fact but is assumed for analysis purposes — for example, assuming a property is already built when it has not yet been constructed.

Which USPAP standard specifically addresses the development of a real property appraisal?

Answer: Standards Rule 1

Standards Rule 1 governs the development of real property appraisals, establishing what the appraiser must do to produce a credible value opinion.

Under USPAP, an appraiser must clearly disclose extraordinary assumptions and hypothetical conditions because:

Answer: Their use might affect the assignment results, and intended users must understand this

Disclosure is required because extraordinary assumptions and hypothetical conditions could affect the value conclusion, and intended users need this information to properly rely on the appraisal.

Under USPAP Standards Rule 1-4(c), the income approach to value is developed by:

Answer: Analyzing the subject's income potential through market-derived income and expense data and appropriate capitalization methods

SR 1-4(c) requires the income approach to be developed using market-derived income, expense data, and appropriate capitalization or discounting techniques.

Under USPAP, the cost approach requires the appraiser to:

Answer: Estimate the value of the land separately and estimate the depreciated cost of improvements

The cost approach requires a separate land value estimate and an estimate of the cost of improvements less all forms of depreciation.