Property Valuation
What is an 'extraordinary assumption' versus a 'hypothetical condition' in an appraisal?
AA. Both involve the appraiser inventing facts; extraordinary assumptions are for positive facts, hypothetical for negative
BB. An extraordinary assumption treats an unverified fact as true for appraisal purposes; a hypothetical condition assumes something known to be contrary to fact✓ Correct
CC. They are identical concepts with different names used in different appraisal contexts
DD. Extraordinary assumptions are standard; hypothetical conditions require client approval
Explanation
An extraordinary assumption treats a fact as true because it cannot be verified but could affect the value—if wrong, the opinion might differ. A hypothetical condition assumes something the appraiser knows to be contrary to fact (e.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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