Certified Residential Appraiser Practice Exam

Which principle is critical to understanding extraordinary assumptions in appraisal?

1. Assumptions are always supported by data

2. Assumptions can be made without verification

3. Assumptions are based on existing facts only

4. Assumptions must be proven true before appraisal

The correct answer is: Assumptions can be made without verification

The critical principle regarding extraordinary assumptions in appraisal is that these assumptions can be made without verification. Extraordinary assumptions are used in situations where certain critical conditions or facts about a property are not known but are necessary for the appraisal process. By making an extraordinary assumption, an appraiser can establish a hypothetical scenario that aids in forming an opinion of value. While these assumptions need to be reasonable and should be disclosed in the appraisal report, they do not require prior verification. This allows the appraiser the flexibility to utilize data and arrive at a conclusion based on the assumption that the information is accurate, even if it has not been substantiated at the time of the appraisal. This principle is essential because appraisers often face uncertainty regarding specific aspects of a property, and the use of extraordinary assumptions helps them navigate these complexities while still providing a credible analysis. The other alternatives do not accurately capture the essence of extraordinary assumptions. For instance, assumptions being always supported by data, based strictly on existing facts, or needing to be proven true before appraisal are not applicable to extraordinary assumptions, which are specifically defined by their nature of being hypothetical and not always verifiable.