A hypothetical condition is used when something is contrary to "what is".
An extraordinary assumption is used when there is uncertainty about "what is".
(See the USPAP Definitions)
For prospective (future) events, there is no "is". There is just "maybe/might be". If one wants to take it to its logical extreme, since any future event occurring has a level of uncertainty but also has a probability (and therefore, any future event is possible), then nothing is really contradictory to what might exist. Taking it to that extreme isn't practical in the real world.
What is practical is to make a determination if the future event is reasonable or not.
If it is reasonable, then an EA is appropriate (we have some uncertainty about it, but we believe it will occur).
If it is unreasonable, then an HC is appropriate (we believe it will be contrary to what will exist in the future); even though there is inherent uncertainty in that, we've concluded the event is not going to occur.
We make assumptions about future events all the time when concluding a present value and those assumptions don't require an EA or HC, but they do still have a level of uncertainty (A DCF, for example). What we don't (or shouldn't) do is make unreasonable forecasts or assumptions about the future when concluding a present value. We can make these forecasts without an EA or HC because we are valuing the subject as-of current. We have all the necessary information to form the opinion without any special EA or HC tools; our general assumptions are sufficient enough.
If I were doing a prospective value of 2-weeks in the future rather than 2-years in the future, would I use an HC? If I could reasonably assume nothing significant would change in the next 2-weeks, I wouldn't use an HC. I would use an EA, however; even though I'm very confident the risk of something changing in 2-weeks is low, since I'm valuing the property 2-weeks from now rather than "now", I have to alert the client/intended user that if something changes in the next two 2-weeks, it could affect results.
Some prospective assignments warrant an HC. I did not consider the possibility that George raised: the project isn't feasible based on what we know now. If it isn't feasible, then it shouldn't go forward. Since it shouldn't but the client wants me to value the subject as-if it did go forward, that is an unreasonable assumption. I'm certain (or sufficiently confident) that my "should not go forward" conclusion is correct, so if the client wants me to value the property contrary to this, I'll need an HC (and the HC needs to pass the USPAP HC use-requirements).
Conversely, if the project is feasible, and the market evidence supports that the project would go forward, then at that point I (Denis) don't need an HC to consider if the project will be completed; it is reasonable to conclude it will. And, assuming the costs are in-line and the schedule makes sense, it is reasonable to conclude that it will be completed at the budget and within the schedule. All I need is an EA to alert my client that since this is a value in the future, my assumption that the budget will be met and the project finished on-schedule is an assumption and if it doesn't happen that way, results could be affected.
If one of those components is unreasonable, then I need to change the cost-forecasts or alter the project's schedule so that what I do conclude remains reasonable. If the client won't allow that, I have to determine if an HC is appropriate, because now an EA isn't.
In the feasibility study (let's assume 3 competing uses), I'm not sure that the appraiser would need an HC to analyze each proposed use if the assignment calls for a contrast and compare analysis between the uses, with the appraiser then concluding which use is the most feasible. The comparison of the three competing uses is not the assignment result- the comparison component is part of the analysis.
The conclusion of which use is the best is the assignment result. That wouldn't need an HC (IMO) if the assumptions were reasonable and the appraiser concluded that is how the market would react. I'd use an EA.
But, that's my opinion. I'm fine with the "it isn't settled science" assertion. I used to think prospective assignments always needed an HC (some years ago); I've obviously changed my opinion.
I do think some prospective assignments need an HC. I think George has made that clear. I just don't think all prospective assignments need an HC (I think most don't; or, at least, those which I've been exposed to).
And, yes, this is inside-baseball (geek talk) but the use of an EA or HC may impact how some of our clients can use the information. So what we decide to call it may have meaning outside of the academic debate.
