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Question 1Review theory and practice

Which statement best describes the primary purpose of a review appraisal under USPAP?

  1. To form an independent opinion about the quality of another appraiser's work Correct answer.
  2. To replace the original appraisal with a corrected value conclusion
  3. To serve as a substitute for the original appraiser's certification
  4. To negotiate a settlement between the appraiser and the client

Explanation

A review is an opinion about the quality and completeness of another appraiser's work, not a new assignment to value the property. The reviewer evaluates whether the analysis, data, and conclusions are credible and adequately supported. Producing a corrected value is a separate appraisal assignment.

Question 2Review theory and practice

In a review, the term 'credibility' most nearly refers to whether the analysis and conclusions are:

  1. worthy of belief and supported by the evidence presented Correct answer.
  2. free of typographical or clerical errors
  3. formatted according to the client's template
  4. consistent with the reviewer's own value opinion

Explanation

Credibility addresses whether the work is worthy of belief given the data, reasoning, and support provided. It is a substantive judgment about support, not about surface errors or the reviewer's personal conclusion. A report can have minor clerical issues and still be credible.

Question 3Review theory and practice

A reviewer is engaged to review an appraisal but is not asked to develop a value opinion. Under USPAP, this engagement is best characterized as:

  1. a consulting assignment
  2. a restricted appraisal
  3. an appraisal update
  4. a review without a value opinion Correct answer.

Explanation

USPAP distinguishes reviews that include the reviewer's own value opinion from reviews that do not. When the scope excludes developing a value, the assignment is a review without a value opinion. It is not an appraisal update or a consulting product.

Question 4Review theory and practice

Before accepting a review assignment, a reviewer should first confirm competence. Which action best demonstrates compliance with the competency rule?

  1. Relying on the original appraiser's data without independent verification
  2. Completing the review and noting the competence gap in the addendum afterward
  3. Declining all reviews involving property types outside the reviewer's experience
  4. Disclosing any lack of knowledge and taking steps to gain competence before completing the assignment Correct answer.

Explanation

The competency rule requires the appraiser to have or acquire the knowledge and skills needed before completing the assignment. Disclosure combined with appropriate steps to gain competence satisfies the rule. Simply declining or learning after the fact does not.

Question 5Review theory and practice

A reviewer finds that the original appraiser used a comparable sale that closed eight months before the effective date while closer, more recent sales were available. The most appropriate reviewer conclusion is that the original analysis:

  1. may lack adequate support for the market conditions adjustment Correct answer.
  2. should be replaced entirely by the reviewer's own comparables
  3. is acceptable because any closed sale is valid evidence
  4. is automatically invalid because of the sale's age

Explanation

The reviewer evaluates whether the selection and adjustment of comparables are adequately supported. Using an older sale is not per se wrong, but the appraiser must support any market conditions adjustment and explain why more recent data was not used. The reviewer's role is to assess support, not to substitute a new analysis.

Question 6Review theory and practice

Which of the following is the best example of an extraordinary assumption in a review assignment?

  1. The property is free of hazardous materials based on the client's representation Correct answer.
  2. The market will remain stable through the marketing period
  3. The original appraisal report is accurately transcribed from the appraiser's file
  4. The property is in average condition as of the effective date

Explanation

An extraordinary assumption presumes a fact that, if found false, could alter the reviewer's conclusions. Reliance on the client's representation about hazardous materials is such a presumption. Market stability is a projection, and condition statements are ordinary assumptions.

Question 7Review theory and practice

An appraiser completes a review and concludes the original value opinion is not credible, but the client did not request a new value. The reviewer should:

  1. report the credibility finding and the reasons without developing a new value Correct answer.
  2. refuse to issue any review report
  3. state the original value is wrong and substitute a corrected value
  4. refer the matter to the state regulator automatically

Explanation

When the scope of work excludes a value opinion, the reviewer reports the credibility conclusion and its support without substituting a value. Developing a new value would exceed the agreed scope. Regulatory referral is not an automatic reviewer duty.

Question 8Review theory and practice

Which factor is LEAST relevant when a reviewer assesses the reasonableness of the original appraiser's highest and best use conclusion?

  1. Legally permissible uses at the effective date
  2. The original appraiser's personal preference among the uses Correct answer.
  3. Physically possible uses of the site
  4. Financially feasible uses supported by market data

Explanation

Highest and best use is tested through legally permissible, physically possible, financially feasible, and maximally productive criteria. Personal preference of the appraiser is irrelevant to that test. The reviewer checks whether each test was reasonably applied.

Question 9Review theory and practice

A reviewer is examining an income approach where the appraiser capitalized net operating income using an overall rate derived from comparable sales. The key review question is whether the:

  1. tenant leases were signed on a weekend
  2. gross income multiplier was rounded to two decimals
  3. property manager's fee was paid monthly
  4. comparable sales used to derive the rate are comparable in risk and income characteristics Correct answer.

Explanation

An overall capitalization rate drawn from comparables is only as good as the comparability of those sales in risk, growth, and income potential. The reviewer tests whether the rate is supported by truly comparable transactions. Administrative details like payment timing are not substantive review issues.

Question 10Review theory and practice

Which of the following best describes the reviewer's obligation regarding the original appraiser's scope of work?

  1. The reviewer must redo all of the original research independently
  2. The reviewer assesses whether the original scope of work was sufficient to produce credible results Correct answer.
  3. The reviewer must accept the stated scope without comment
  4. The reviewer must expand the scope to include the reviewer's preferred methods

Explanation

The reviewer evaluates whether the original appraiser's scope of work was appropriate for the assignment and sufficient to support credible results. The reviewer does not automatically redo all research or impose personal preferences. The focus is sufficiency relative to the assignment.

Question 11Review theory and practice

A reviewer notes that the original report contains a factual error in the legal description but the error does not affect the value conclusion. The most appropriate reviewer treatment is to:

  1. note the error and explain its effect, if any, on the analysis Correct answer.
  2. declare the entire appraisal not credible
  3. adjust the value conclusion downward to reflect the error
  4. ignore the error entirely

Explanation

The reviewer should identify errors and assess whether they materially affect the analysis or conclusion. A non-material error is disclosed but does not by itself destroy credibility. Adjusting value for a clerical error is not warranted.

Question 12Review theory and practice

Which statement about the reviewer's own value opinion in a review assignment is most accurate?

  1. It is always required in every review
  2. It may be included only if the scope of work calls for it Correct answer.
  3. It must equal the original value if the data are the same
  4. It replaces the original appraiser's opinion of record

Explanation

A reviewer's value opinion is developed only when the agreed scope of work includes it. When included, it is the reviewer's independent conclusion and does not replace the original opinion of record. Identical data do not compel identical conclusions.

Question 13Review theory and practice

A reviewer suspects the original appraiser may have been influenced by pressure from a party with a financial interest in a higher value. The reviewer's most appropriate action is to:

  1. accuse the appraiser of misconduct in the report
  2. quietly discount the value conclusion without explanation
  3. ignore the concern because intent cannot be proven
  4. report the concern factually and note its potential effect on credibility Correct answer.

Explanation

The reviewer reports observable facts and analyzes their effect on credibility without making unsupported accusations. Speculation about intent is avoided, but the concern and its implications are disclosed. Silent adjustment or suppression of the issue is inappropriate.

Question 14Review theory and practice

Which of the following is the strongest evidence that an original appraisal's reconciliation was reasonable?

  1. The appraiser explained why the most reliable approach was given the greatest weight Correct answer.
  2. The appraiser averaged all approaches equally
  3. The appraiser chose the highest indicated value
  4. The appraiser selected the approach with the fewest adjustments

Explanation

Reconciliation requires reasoned judgment about the relative reliability of each approach given the property and market. The appraiser should explain the weighting. Mechanical averaging or picking the highest value is not a substitute for reasoning.

Question 15Review theory and practice

In reviewing a cost approach, the reviewer should focus primarily on whether:

  1. the effective age equals the actual age
  2. the cost new was obtained from the lowest bidder
  3. the land value and depreciation estimates are supported and consistently applied Correct answer.
  4. the developer's profit was excluded from the analysis

Explanation

The cost approach depends on supportable land value, reproduction or replacement cost, and depreciation. The reviewer tests whether these components are supported and internally consistent. Lowest bidder, age equality, and exclusion of entrepreneurial profit are not the central review criteria.

Question 16Review theory and practice

A reviewer is asked to evaluate an appraisal that relied on a hypothetical condition. The reviewer should first determine whether the:

  1. appraiser obtained the client's verbal approval
  2. hypothetical condition was clearly disclosed and necessary for the intended use Correct answer.
  3. condition increased the value conclusion
  4. report included photographs of the subject

Explanation

A hypothetical condition must be clearly disclosed and justified by the assignment's intended use. The reviewer checks disclosure and necessity. Verbal approval, value effects, and photographs are not the threshold test.

Question 17Review theory and practice

Which of the following best characterizes the reviewer's use of the original appraiser's workfile?

  1. The workfile is irrelevant to a review
  2. The reviewer has an unrestricted right to demand any workfile at will
  3. The reviewer must always obtain the workfile before issuing any opinion
  4. The reviewer may request workfile access when needed to assess support, subject to the client's engagement Correct answer.

Explanation

The reviewer may need workfile access to evaluate support, but access depends on the engagement and the appraiser's obligations. The workfile is relevant evidence of the analysis. It is not, however, an absolute right of the reviewer in every case.

Question 18Review theory and practice

A reviewer concludes the original appraisal's market conditions adjustment is unsupported. Which reviewer action best reflects sound practice?

  1. State the conclusion and cite market evidence showing the adjustment is inconsistent with the data Correct answer.
  2. Recommend the appraiser be disciplined
  3. State only that the adjustment is wrong without further support
  4. Recalculate the adjustment using an unrelated index

Explanation

A reviewer's criticism should itself be supported by evidence and reasoning. Citing market data that contradicts the adjustment strengthens the review. Unsupported criticism or unrelated recalculations weaken the review's credibility.

Question 19Review theory and practice

Which of these is an ordinary assumption most likely found in a review report?

  1. The market will appreciate at a stated rate
  2. The property is assumed free of environmental contamination
  3. The information provided by the client is accurate unless otherwise noted Correct answer.
  4. The property will be rezoned within one year

Explanation

Ordinary assumptions are typical, generally accepted presumptions that apply to most assignments, such as reliance on client-provided information. Extraordinary assumptions and projections are assignment-specific. Rezoning and appreciation forecasts are not ordinary assumptions.

Question 20Review theory and practice

A reviewer evaluating a discounted cash flow analysis in the income approach should be most concerned with whether the:

  1. property has a swimming pool
  2. spreadsheet uses color-coded cells
  3. projection period and discount rate are supported and internally consistent Correct answer.
  4. tenant names are alphabetized

Explanation

DCF review centers on the reasonableness of cash flow projections, the projection period, and the discount rate, and whether these elements are consistent with each other and the market. Presentation details are not substantive review concerns.

Question 21Review theory and practice

Which statement best captures the reviewer's duty when the original report omits a required certification element?

  1. The reviewer should add the missing certification on the appraiser's behalf
  2. The reviewer should assume the appraiser intended to include it
  3. The reviewer should ignore it because certifications are optional
  4. The reviewer should note the omission and assess whether it affects the report's compliance and credibility Correct answer.

Explanation

The reviewer identifies compliance deficiencies and evaluates their significance. The reviewer cannot cure the original appraiser's certification, nor should the omission be ignored or assumed away. The review documents the deficiency and its effect.

Question 22Review theory and practice

A reviewer is comparing two appraisals of the same property that reach materially different values. The most useful first step is to:

  1. select the higher value as more conservative
  2. average the two values to reach a compromise
  3. assume one appraiser made an error
  4. identify the key assumptions and data differences driving the divergence Correct answer.

Explanation

Reconciling divergent appraisals begins with isolating the drivers of the difference, such as data selection, adjustments, and assumptions. Averaging or choosing by rule of thumb is not analysis. Assuming error without evidence is premature.

Question 23Review theory and practice

In a review, the reviewer's conclusion that the original value is credible most directly depends on whether the:

  1. original analysis is adequately supported and internally consistent Correct answer.
  2. client is satisfied with the original value
  3. original report is longer than the reviewer's report
  4. reviewer personally would have reached the same value

Explanation

Credibility turns on the quality of support and internal consistency of the original work, not on whether the reviewer would have reached an identical number. Length and client satisfaction are not substantive criteria. A credible conclusion can differ from the reviewer's own value.

Question 24Review theory and practice

A reviewer evaluating a sales comparison grid finds that the appraiser applied a large positive adjustment for location but provided no market support. The reviewer's most defensible conclusion is that the:

  1. adjustment must be reversed
  2. appraisal should be discarded entirely
  3. adjustment is acceptable because location adjustments are common
  4. adjustment is unsupported and weakens the credibility of the value conclusion Correct answer.

Explanation

Adjustments must be supported by market evidence; a large unsupported adjustment undermines confidence in the conclusion. The reviewer does not arbitrarily reverse adjustments, and common practice does not excuse lack of support. Total rejection is a disproportionate response.

Question 25Review theory and practice

Which of the following best describes how a reviewer should treat the original appraiser's extraordinary assumptions when those assumptions are not supported by the assignment's intended use?

  1. The reviewer should evaluate whether they were appropriate and disclose any concern about their effect Correct answer.
  2. The reviewer should replace them with the reviewer's own assumptions
  3. The reviewer should ignore them since they are the appraiser's responsibility
  4. The reviewer should accept them because the appraiser disclosed them

Explanation

Disclosure alone does not make an extraordinary assumption appropriate; it must be justified by the assignment and intended use. The reviewer evaluates appropriateness and reports concerns. The reviewer does not substitute assumptions or ignore the issue.

Question 26Review theory and practice

In appraisal review, the term 'client' most precisely refers to the party who:

  1. owns the property that is the subject of the original appraisal
  2. holds the mortgage secured by the subject property
  3. provided the original appraisal being reviewed
  4. engages the reviewer and defines the review's intended use Correct answer.

Explanation

The client is the party who engages the reviewer and sets the scope and intended use of the review assignment. Other parties, such as the property owner or original appraiser, may be involved but do not define the assignment.

Question 27Review theory and practice

The primary purpose of an appraisal review is to:

  1. establish the market value for a pending transaction
  2. correct errors in the original report so it can be relied upon
  3. produce a new independent appraisal of the same property
  4. form an opinion about the quality of another appraiser's work Correct answer.

Explanation

A review develops an opinion on the quality of another appraiser's work, which may include adequacy, appropriateness, and credibility. It does not automatically produce a new value opinion or rewrite the original report.

Question 28Review theory and practice

When a review assignment's scope of work calls only for evaluating the original report's completeness and internal consistency, the reviewer is performing:

  1. an administrative or technical review Correct answer.
  2. a field review with interior inspection
  3. a complete appraisal with a new value opinion
  4. a retrospective value update

Explanation

A review limited to completeness and internal consistency is administrative or technical in nature and does not require developing a value opinion. Field inspection and new value development exceed that scope.

Question 29Review theory and practice

A reviewer who lacks competency for a review assignment should first:

  1. disclose the limitation and take steps to gain the needed competency or decline Correct answer.
  2. substitute a colleague's signature on the report
  3. rely entirely on the original appraiser's conclusions
  4. complete the review and note the limitation in a footnote

Explanation

Competency requires the reviewer to disclose any lack of knowledge and either acquire the necessary competency or decline the assignment. Proceeding without disclosure or relying uncritically on the original work is improper.

Question 30Review theory and practice

Which document typically establishes the reviewer's obligations, intended use, and scope of work for a specific assignment?

  1. the engagement letter or review agreement Correct answer.
  2. the multiple listing service data sheet
  3. the original appraisal report's certification
  4. the subject property's deed

Explanation

The engagement document defines what the reviewer is to do, for whom, and for what intended use. The original report, deed, and listing data are inputs, not statements of the reviewer's obligations.

Question 31Review theory and practice

Which of the following is the best example of an ordinary assumption in a review report?

  1. Information supplied by third parties is assumed accurate unless contradicted by the reviewer's analysis Correct answer.
  2. The subject is assumed to be subdivided as proposed but not yet completed
  3. The property is assumed free of hazardous materials pending a future environmental study
  4. The property is assumed to be leased at a rent that does not yet exist

Explanation

An ordinary assumption is a typical, generally accepted premise that does not require special disclosure because it applies to most assignments. Assumptions about conditions that may not exist are extraordinary and must be specific and disclosed.

Question 32Review theory and practice

A reviewer's report should identify the original appraiser and the date of the original report primarily to:

  1. transfer liability for the original value to the reviewer
  2. satisfy a requirement to criticize the appraiser by name
  3. confirm that the reviewer inspected the property
  4. establish the identity and context of the work being reviewed Correct answer.

Explanation

Identifying the original appraiser and report date provides necessary context and traceability for the reviewed work. It is not intended to assign blame, shift liability, or imply an inspection.

Question 33Review theory and practice

In a review, the reviewer's opinion of the credibility of the original appraisal is best characterized as:

  1. an opinion that the property was inspected properly
  2. a judgment about whether the original analysis and conclusions are worthy of belief Correct answer.
  3. a guarantee that the original value is exactly correct
  4. a restatement of the original appraiser's value conclusion

Explanation

Credibility concerns whether the original work is sufficiently supported and logical to be worthy of belief. It is not a warranty of exact value, a restatement, or a proxy for inspection quality.

Question 34Review theory and practice

A reviewer is evaluating an original appraisal that used a comparable sale located outside the defined neighborhood boundaries without explanation. The reviewer's most appropriate action is to:

  1. accept the comparable because all sales are interchangeable
  2. reject the appraisal solely because the comparable is outside the boundaries
  3. analyze whether the comparable is competitive and note any unsupported use Correct answer.
  4. ignore the issue because location is not relevant to value

Explanation

The reviewer should evaluate whether the sale is competitive with the subject and whether the original appraiser justified its use. Boundary lines alone do not invalidate a comparable, and location is clearly relevant.

Question 35Review theory and practice

A reviewer finds that the original appraiser's cost approach used a replacement cost new that is materially higher than current local builder data, with no supporting source cited. The reviewer should:

  1. question the unsupported figure and determine whether it materially affects the conclusion Correct answer.
  2. replace the figure with the reviewer's own estimate and finalize the review
  3. disregard the cost approach entirely regardless of its weight
  4. accept the figure because cost estimates are inherently subjective

Explanation

An unsupported cost figure should be questioned, and the reviewer should assess whether the discrepancy is material to the final conclusion. The reviewer does not simply substitute figures or discard an approach without analysis.

Question 36Review theory and practice

In reviewing a report's reconciliation, the reviewer should primarily assess whether the appraiser:

  1. explained the weight given to each approach and resolved differences logically Correct answer.
  2. omitted discussion of approaches not used
  3. selected the highest value indicated by any approach
  4. used all three approaches regardless of relevance

Explanation

A sound reconciliation explains the relative weight given to each approach and resolves any differences into a supported conclusion. Using all approaches, choosing the highest value, or omitting discussion are not substitutes for reasoned weighting.

Question 37Review theory and practice

A reviewer is examining an original appraisal where the appraiser applied a market conditions adjustment of 1% per month over 18 months. The reviewer should be most concerned with whether the:

  1. appraiser used a spreadsheet to calculate the adjustment
  2. adjustment was applied to the subject rather than the comparables
  3. rate and time period are supported by market evidence for that segment Correct answer.
  4. adjustment was disclosed in the addenda

Explanation

The key issue is whether the magnitude and duration of a market conditions adjustment are supported by market evidence. Calculation method and disclosure do not substitute for support.

Question 38Review theory and practice

When a reviewer finds that the original appraiser misidentified the property's zoning, and the error affects the highest and best use conclusion, the reviewer should:

  1. conclude the analysis is not credible to the extent the error affects the conclusion Correct answer.
  2. report the error only if the client asks about zoning
  3. treat the error as immaterial because zoning is a legal matter
  4. ignore the error and rely on the original highest and best use

Explanation

A material factual error that affects a key conclusion undermines credibility to that extent and must be addressed in the review. Zoning directly affects highest and best use, so it cannot be dismissed as immaterial.

Question 39Review theory and practice

A reviewer is assessing whether the original appraiser's income approach properly handled a below-market lease. The most relevant question is whether the appraiser:

  1. reflected the lease terms and market rent in the cash flow and capitalized accordingly Correct answer.
  2. used the highest overall capitalization rate available
  3. applied the same treatment to all leases regardless of terms
  4. included a rent comparable from a different property type

Explanation

Below-market leases require analysis of contract versus market rent and appropriate reflection in the cash flow and capitalization. Rate selection and unrelated comparables do not address the lease issue.

Question 40Review theory and practice

A reviewer is evaluating an original appraisal's highest and best use analysis that concluded a vacant parcel should be developed as a retail center, but the analysis contains no market demand or feasibility support. The reviewer should:

  1. accept the conclusion because it is the most profitable use
  2. find the conclusion unsupported and evaluate how the deficiency affects credibility Correct answer.
  3. assume the appraiser verified demand informally
  4. defer to the appraiser's professional judgment without question

Explanation

A highest and best use conclusion must be supported by evidence of legal permissibility, physical possibility, financial feasibility, and maximum productivity. When support is absent, the reviewer should identify the deficiency and assess its effect on credibility.

Question 41Review theory and practice

A reviewer is asked to evaluate an original appraisal that relied on a hypothetical condition. The reviewer should first determine whether the hypothetical condition was:

  1. supported by at least three comparable sales
  2. clearly disclosed and necessary for the intended use of the assignment Correct answer.
  3. approved by the property owner in writing
  4. consistent with the reviewer's own assumptions

Explanation

A hypothetical condition must be clearly disclosed and necessary for the assignment's intended use. Owner approval, comparable count, and reviewer preference are not the governing tests.

Question 42Review theory and practice

When the reviewer's scope of work includes developing a new value opinion, the reviewer should:

  1. average the original value and the reviewer's estimate
  2. support that opinion with the reviewer's own analysis and data Correct answer.
  3. defer the value opinion to the client
  4. adopt the original value if it appears reasonable

Explanation

If the assignment requires the reviewer to develop a value opinion, that opinion must be independently supported by the reviewer's own analysis and evidence. Adopting, averaging, or deferring does not meet that requirement.

Question 43Review theory and practice

A reviewer is comparing the original appraiser's effective age estimate with the actual condition observed in photographs included in the report. The photographs show significant deferred maintenance not reflected in the estimate. The reviewer should:

  1. assume the photographs were taken at a different time
  2. accept the estimate because effective age is subjective
  3. ignore the discrepancy because photographs are not reliable evidence
  4. question the effective age and consider its effect on depreciation and value Correct answer.

Explanation

Inconsistencies between reported condition and documentary evidence should be investigated and evaluated for their effect on depreciation and value. Subjective estimates are not immune from review, and photographs are legitimate evidence.

Question 44Review theory and practice

A reviewer concludes that the original appraisal's value opinion is not credible but the assignment's scope did not require the reviewer to develop a new value. The reviewer should:

  1. recommend that the original appraiser be disciplined
  2. provide a replacement value opinion anyway
  3. refuse to issue any review report
  4. report the credibility conclusion and explain the deficiencies found Correct answer.

Explanation

When the scope does not require a new value opinion, the reviewer reports the credibility conclusion and the reasons for it. Providing an unrequested value opinion or refusing to report exceeds or misstates the assignment.

Question 45Review theory and practice

A reviewer is evaluating an original appraisal in which the appraiser used only the sales comparison approach for a stabilized apartment building. The reviewer's most defensible position is that:

  1. the omission of the income approach may be a significant deficiency given the property type Correct answer.
  2. the income approach is never required for income properties
  3. the sales comparison approach is always sufficient for apartments
  4. the omission is acceptable if the value conclusion seems reasonable

Explanation

For an income-producing property, omission of the income approach is a potentially significant deficiency that the reviewer must evaluate. The approach is not automatically required, but its omission for a stabilized apartment building warrants scrutiny.

Question 46Review theory and practice

A reviewer is examining an original appraisal where the appraiser's reconciliation selected a value at the low end of the sales comparison range without explanation. The reviewer's most rigorous conclusion is that the:

  1. selection proves the appraiser was biased
  2. selection may be supportable but requires explanation to be credible Correct answer.
  3. selection is acceptable because reconciliation is subjective
  4. selection is automatically invalid because it is not the midpoint

Explanation

Selecting a value at either end of a range can be appropriate, but the appraiser must explain the reasoning. The midpoint is not a required result, and bias cannot be inferred from the selection alone.

Question 47Review theory and practice

A reviewer is evaluating whether an original appraiser's extraordinary assumption was properly used. The reviewer's most rigorous test is whether the assumption was:

  1. necessary because the assignment required analysis of a condition that may not be true Correct answer.
  2. consistent with the client's desired value
  3. broad enough to cover all foreseeable uncertainties
  4. disclosed only in the appraiser's workfile

Explanation

An extraordinary assumption is appropriate only when the assignment requires assuming a specific condition that may not be true, and it must be clearly disclosed in the report. Breadth, workfile-only disclosure, and client preference are not valid tests.

Question 48Review theory and practice

A reviewer finds that the original appraiser's report contains an internal inconsistency between the stated site area and the area used in the sales comparison adjustments. The most appropriate reviewer response is to:

  1. recompute the adjustments using the reviewer's own data
  2. conclude the entire appraisal is fraudulent
  3. ignore the inconsistency because it is clerical
  4. determine whether the inconsistency is material to the value conclusion Correct answer.

Explanation

The reviewer should assess materiality of the inconsistency and its effect on the conclusion. Not every inconsistency is fraudulent, and recomputing with the reviewer's own data exceeds the review's role unless the scope requires it.

Question 49Review theory and practice

A reviewer is evaluating an original appraisal's use of a discounted cash flow analysis. The reviewer should be most concerned with whether the:

  1. discount rate was higher than the overall capitalization rate
  2. cash flow projections, discount rate, and terminal value are supported and internally consistent Correct answer.
  3. analysis included at least ten years of projections
  4. model was built in a commonly used spreadsheet program

Explanation

The validity of a DCF depends on support for the cash flow projections, the discount rate, and the terminal value, and on their internal consistency. Software choice, projection length, and a rate comparison are not the central tests.

Question 50Review theory and practice

A reviewer is assessing the original appraiser's selection of comparables that all sold at least 24 months before the effective date in a market with documented rising prices. The reviewer should:

  1. accept the comparables because they are the most recent available
  2. reject the comparables solely because of their age
  3. evaluate whether the comparables are still competitive and whether market conditions adjustments are supported Correct answer.
  4. assume market conditions are stable absent a published index

Explanation

Older comparables may still be usable if they are competitive and if market conditions adjustments are properly supported. Age alone does not require rejection, and stability cannot be assumed without evidence.