Hypothetical Condition or not

[Ricky LaFleur]

FAQ is not USPAP and imo the are wrong on this one

I hear everybody harp on this so much, and while it is technically true, don't think for a moment that it will not be quoted at the state board hearing as infallible interpretation of USPAP handed down from above and used against you.

 

[Dublin ohio]

Hypothetical extraordinary assumption or extraordinary hypothetical condition?

 

[J Grant]

Hypothetical extraordinary assumption or extraordinary hypothetical condition?

lol just call it all of them and cover yourself.

 

[sputnam]

The value opinion, by its nature, is hypothetical. It need not be stated as such, but it is -that is what constitutes an appraisal ( or estimate if it is a valuation )

The SCA ad defined in the MV opinion says the subject ( a house, for example ) the house closed/changed title as of the effective date in the appraisal. For example, the eff date of inspection/value is 3 days ago. Did the subject actually close and change the title 3 days ago ? No. It is a hypothetical appraisal "sale" for valuation purposes. On the cost approach, was the subject built/replaced 3 days ago? Of course not. It is a hypothetical event for valuation purposes. The MV uses the word implicit, which perhaps is a better word than hypothetical. Either way, it is not a real world actual event, it is created within the appraisal itself. In case certain people want to trash an appraisal for that, a valuation does a similar thing, but since a computer/AVM can derive it, it is called an estimate and not an opinion. The specified date in the appraisal is normally the effective date.

To sum up, did the subject, in real life, actually pass title/ consummate sale as of your eff date? 99.99 of the time, no, it did not ( or would not for a prospective date since it has not happened yet )

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming
the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and
the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both
parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a
reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms
of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.

Whether a property sale closed or not is not a HC and shouldn't be an EA. At least in the areas I work in, you just check online.

 

[J Grant]

Whether a property sale closed or not is not a HC and shouldn't be an EA. At least in the areas I work in, you just check online.

That is not what I was referring to- I was just putting it out there that every value opinion is hypothetical/implicit in nature -the MV definition references the subject passing title/consummating sale as of X effective date, yet we know in the real world it does not happen- so

 

[BRCJR]

My favorite is when assumptions are labeled as extraordinary assumptions. There is a difference but many call everything an extraordinary assumption.

Go figure....CYA maybe.

An assumption is a statement or condition that is presumed or assumed to be true and from which a conclusion can be drawn. USPAP defines an assumption as "that which is taken to be true". An extraordinary assumption is an assumption which if found to be false could alter the resulting opinion or conclusion.

 

[Terrel L. Shields]

very value opinion is hypothetical/implicit in nature

No. They are an opinion. Not fact, not conjecture, not hypothetical.

 

[J Grant]

No. They are an opinion. Not fact, not conjecture, not hypothetical.

Of course, it is an opinion -it is an opinion based on a hypothetical event- ( that an implicit "sale" occurred on the effective date )

it says it right there in the MV definition we use ( example below ) - assuming we are appraising for MV, which a majority of assignments are. The hypothetical event is the impact consumption of the subject sale as of a specified date ( usually the effective date ) . Did your subject actually SELL/CLOSE PASS TITLE on your effective appraisal value date? No, it did not . So the "sale" is a hypothetical event used for modeling the value.

We don't just take a subject, gather data, and opine it is worth X $. The appraisal creates an implicit sale in the SCA, and from that we make adjustments reconcile a value and state it as an opinion.

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming
the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and
the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both

 

[George Hatch]

I think this is an example of "uniform" and consistency being more important to any user than idealogical purity. That's why I defer to the ASBs explanation even though I know for a fact that "doesn't exist now and will sometimes never exist" is a thing IRL.

If if was a proposed lease and the signatories were sketchy most of us wouldn't ASSUME its execution as a future fact. We'd consider it a hypothetical that may or may not occur.

All we're really debating is the labeling of the elements of the valuation scenario. Regardless of the label being used, the appraiser's actions and disclosures remain the same. A proposed improvement (or other condition) doesn't exist now but it might exist as of a future date, which if it does then this is how much we think it will be worth.

 

[sputnam]

Of course, it is an opinion -it is an opinion based on a hypothetical event- ( that an implicit "sale" occurred on the effective date )

it says it right there in the MV definition we use ( example below ) - assuming we are appraising for MV, which a majority of assignments are. The hypothetical event is the impact consumption of the subject sale as of a specified date ( usually the effective date ) . Did your subject actually SELL/CLOSE PASS TITLE on your effective appraisal value date? No, it did not . So the "sale" is a hypothetical event used for modeling the value.

We don't just take a subject, gather data, and opine it is worth X $. The appraisal creates an implicit sale in the SCA, and from that we make adjustments reconcile a value and state it as an opinion.

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming
the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and
the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both

Still not a hypothetical condition in the USPAP sense of the term.