USPAP USPAP 3 — Questions and Answers
Question 1: In USPAP, the term 'extraordinary assumption' is best defined as:
- An assumption that contradicts known facts about the property
- An assumption that, if found to be false, could alter the appraiser's opinions and conclusions (Correct answer)
- An assumption based on hypothetical market conditions
- An assumption required by the client but not supported by market data
Correct answer: An assumption that, if found to be false, could alter the appraiser's opinions and conclusions
An extraordinary assumption presumes as fact something that is uncertain as of the effective date and, if false, could change the value conclusion.
Question 2: A 'hypothetical condition' differs from an 'extraordinary assumption' in that a hypothetical condition:
- Is based on known facts about the property
- May reflect something the appraiser personally believes
- Is contrary to what exists on the effective date of the appraisal (Correct answer)
- Must be approved by the client before use
Correct answer: Is contrary to what exists on the effective date of the appraisal
A hypothetical condition assumes something that is contrary to fact as of the effective date, such as treating a property as if completed when it is not.
Question 3: Under USPAP Standard 2, which of the following must always be disclosed in an Appraisal Report?
- All sales the appraiser considered but rejected
- The appraiser's fee for the assignment
- Any extraordinary assumptions and hypothetical conditions used (Correct answer)
- The identity of all potential users of the report
Correct answer: Any extraordinary assumptions and hypothetical conditions used
Standard 2 requires that extraordinary assumptions and hypothetical conditions be clearly stated and their effect on the assignment results be noted.
Question 4: How long must an appraiser retain workfile records under the USPAP Record Keeping Rule?
- At least 3 years after preparation or 1 year after final disposition, whichever is later
- At least 5 years after preparation or 2 years after final disposition, whichever is later (Correct answer)
- At least 2 years after preparation
- At least 7 years for federally related transactions
Correct answer: At least 5 years after preparation or 2 years after final disposition, whichever is later
The Record Keeping Rule requires retention of workfiles for at least five years after preparation or at least two years after final disposition of any judicial proceeding, whichever is later.
Question 5: Under USPAP, who is responsible for the content of an appraisal report when a supervisory appraiser and trainee are involved?
- Only the trainee appraiser who completed the fieldwork
- Only the supervisory appraiser who signs the certification
- Both the supervisory appraiser and the trainee, each responsible for their own contributions (Correct answer)
- The client, who directs the scope of work
Correct answer: Both the supervisory appraiser and the trainee, each responsible for their own contributions
USPAP holds each signatory responsible for the content of the report and their own contributions to the assignment.
Question 6: Which of the following best describes 'scope of work' under USPAP?
- The fee an appraiser charges for completing an assignment
- The type and extent of research and analyses in an assignment (Correct answer)
- The geographic area covered by the appraiser's market analysis
- The number of comparable sales included in the report
Correct answer: The type and extent of research and analyses in an assignment
Scope of work encompasses the type and extent of research and analyses necessary to produce credible results given the intended use and intended users.
Question 7: Under the USPAP Ethics Rule, which activity is expressly prohibited in the Management section?
- Discussing the appraisal process with the client
- Paying a referral fee to a party who has a financial interest in the outcome (Correct answer)
- Using a cost approach when only a sales comparison is appropriate
- Delegating fieldwork to a licensed appraiser
Correct answer: Paying a referral fee to a party who has a financial interest in the outcome
The Management section of the Ethics Rule prohibits paying or receiving fees, commissions, or things of value related to a party who has an interest in the outcome of the appraisal.
USPAP USPAP 3
In USPAP, the term 'extraordinary assumption' is best defined as: