USPAP USPAP Appraisal Development Standards 1 — Questions and Answers
Question 1: Under USPAP Standards Rule 1-1, an appraiser must NOT render appraisal services in a careless or negligent manner. This standard requires the appraiser to:
- Always use three approaches to value
- Exercise diligence and competence in every assignment (Correct answer)
- Inspect every property in person
- Use only government-approved data sources
Correct answer: Exercise diligence and competence in every assignment
SR 1-1 requires appraisers to exercise diligence and competence, prohibiting careless or negligent performance in any appraisal assignment.
Question 2: Under USPAP, which of the following correctly defines 'market value'?
- The most recent sale price of a comparable property
- The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale (Correct answer)
- The assessed value determined by the tax authority
- The list price set by the seller
Correct answer: The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale
Market value is the most probable price a property would sell for in an open, competitive market between informed parties acting prudently.
Question 3: Under USPAP Standards Rule 1-3, when the value to be developed is market value, the appraiser must:
- Ignore the cost approach if it is not applicable
- Identify and analyze the effect on value of existing and anticipated market conditions (Correct answer)
- Use only the sales comparison approach
- Rely solely on comparable sales from the prior 90 days
Correct answer: Identify and analyze the effect on value of existing and anticipated market conditions
SR 1-3 requires the appraiser to identify and analyze market conditions that affect value, including supply and demand, and typical exposure time.
Question 4: The principle of 'highest and best use' is required to be analyzed under USPAP because it:
- Always results in the highest value conclusion
- Identifies the use that produces the greatest value and forms the basis for value development (Correct answer)
- Is required only for vacant land
- Satisfies lender requirements for loan approval
Correct answer: Identifies the use that produces the greatest value and forms the basis for value development
Highest and best use identifies the most profitable and legally permitted use of a property, which forms the essential foundation for any market value opinion.
Question 5: Under USPAP Standards Rule 1-4, when developing a real property appraisal, an appraiser must consider which approaches to value?
- Only the sales comparison approach
- All applicable approaches to value (Correct answer)
- Cost approach and income approach only
- Only the approach preferred by the client
Correct answer: All applicable approaches to value
SR 1-4 requires the appraiser to consider and develop all applicable approaches to value — cost, sales comparison, and income — when applicable.
Question 6: Under USPAP, 'reconciliation' in the development of a value opinion means:
- Averaging the results of the three approaches
- Analyzing and weighing the results of all approaches to reach a final value conclusion (Correct answer)
- Choosing only the highest indicated value
- Eliminating approaches that show different results
Correct answer: Analyzing and weighing the results of all approaches to reach a final value conclusion
Reconciliation is the process of analyzing and weighing the results of applicable approaches to arrive at a well-supported final value conclusion.
USPAP USPAP Appraisal Development Standards 1
Under USPAP Standards Rule 1-1, an appraiser must NOT render appraisal services in a careless or negligent manner.
This standard requires the appraiser to: