Certified Residential Appraiser Practice Exam

What is a hypothetical condition in appraisal practice?

1. A condition contrary to what is known by the appraiser on the effective date

2. A prediction based on market trends

3. A legally binding agreement regarding property

4. An assumption made without evidence

The correct answer is: A condition contrary to what is known by the appraiser on the effective date

A hypothetical condition in appraisal practice refers to a circumstance that is contrary to what is known by the appraiser at the effective date of the appraisal. It is an assumption that something is true when it is not, specifically to evaluate how it would affect the property's value. This typically involves specific scenarios or situations that the appraiser knows do not exist but are considered for the purpose of the appraisal. For instance, an appraiser may consider a hypothetical condition where the property is assumed to be in a better location or condition than it actually is, to understand how such changes would impact its market value. This contrasts with other choices, which involve elements that either pertain to statistical predictions, legal agreements, or generalized assumptions not clearly linked to the effective date knowledge, which are outside the scope of a hypothetical condition as per appraisal standards.