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IN THE COURSE of reviewing appraisals, most of us go straight to the value conclusion and then probably to the approaches to value. The last thing we want to read is a bunch of legalese, such as limiting conditions and assumptions.
All appraisal reports contain standard qualifiers that often appear in a section called "General Limiting Conditions and Assumptions." These items are worth reading now and then, but they're usually the same from report to report. Also, they usually have no significant effect on value.
However, extraordinary assumptions and hypothetical conditions are very important and can have a significant effect on value. It's important to read these items carefully to understand how they pertain to the value conclusions in the appraisal report.
The Uniform Standards of Professional Appraisal Practice (USPAP) defines an extraordinary assumption as "an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser's opinions or conclusions." A hypothetical condition is defined as "that which is contrary to what exists, but is supposed for the purpose of analysis."
USPAP requires appraisers to clearly and conspicuously state in their appraisal reports any extraordinary assumptions or hypothetical conditions necessary in an assignment. The report must also state that their use may have affected the assignment results.
Real-World Examples
An example of an extraordinary assumption would be appraising a gas station...