What Is an Extraordinary Assumption in Appraisal?

When you conduct a property appraisal, it’s guaranteed there will be areas of the property you can’t access, or areas you aren’t qualified to inspect. In these cases, you may need to include something called an “extraordinary assumption” in your report. Here are the ins and outs of extraordinary assumptions and how to use them in your assignments. 

Extraordinary Assumptions vs. Hypothetical Conditions vs. General Assumptions: Summary 
 

These terms slightly overlap with one another and can seem quite similar, so before we dig into the meat, here’s a simplified breakdown.  

Introduction to Extraordinary Assumption 

 
An extraordinary assumption, as defined by The Uniform Standards of Professional Appraisal Practice (USPAP), is: “An assumption, directly related to a specific assignment, as of the effective date of the appraisal results, which, if found to be false, could alter the appraiser’s opinions or conclusions.”  

For example, if an appraiser comes across a feature of a property that could potentially diminish the overall property value, but they are unable to investigate it further, they will assume the property is in reasonable condition to maintain the higher value. Here are some examples: 

• A crack on the outside of the home — could be structural damage, but an extraordinary assumption would be that it’s just cosmetic 

• A room can’t be entered on the appraisal date — could have chipping paint and damaged walls, but we could assume it aligns with the condition of the rest of the house 

• Land slopes toward a home — the property could struggle with flooding, but we could assume it has effective drainage methods to protect it 

The Role of Extraordinary Assumptions in Appraisals 

Extraordinary assumptions provide a way for appraisers to provide their value opinion on a property even when there are factors they’re unable to see or inspect. It’s crucial for these assumptions to be noted in reports so that if they are incorrect, the value can be appropriately adjusted. This also helps appraisers to find the highest and best use of a property, by assuming “best case scenario” for conditions they can’t verify on their own. 

Influence on Property Valuation 

Let’s say you make an extraordinary assumption in your report that upon your appraisal, a property has no major roofing issues, despite one tile being cracked.  

If later, the roof is inspected by qualified professionals and the damage is found to be significant, your previous opinion would probably change. This may ultimately influence the property value. 

General or Extraordinary Assumption? 

Appraisers are not all-knowing beings (but, man, we wish). Because there will always be unknown factors and areas you can’t properly assess, there will pretty much always be assumptions made. These assumptions are not all extraordinary, though. 

General (or ordinary) assumptions refer to the assumptions made when an appraiser is faced with an ordinary condition that they cannot personally verify. Basically, you would assume that information provided by other parties about a property is reliable, or that unseen parts of a property are in good condition. An example of this is the assumption that a public property is ADA compliant.  

Extraordinary assumptions, on the other hand, are made for “extraordinary” conditions. The primary distinction here is that they are entirely specific to their unique assignments, on the day that assignment is done. These assumptions presume unknown elements of a property as fact.  

Extraordinary conditions can be made for any of the following: 

• Physical, legal, or economic characteristics 

• External conditions, like market conditions 

• The integrity of data used in an analysis 

Extraordinary Assumption vs. Hypothetical Condition 

What if you find flaws that exist, and will negatively impact a property’s value? That's where hypothetical conditions come in. The key difference between extraordinary assumptions and hypothetical conditions is that a hypothetical condition is made for something contrary to what exists. 

The USPAP defines a hypothetical condition as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.” 

For example, if you come across old, stained carpeting in a couple of rooms in an assignment, you can provide your value opinion based on the hypothetical condition that the carpets are cleaned or replaced. If you don’t appraise the inside of the home at all, and can’t see the carpets, you can make the extraordinary assumption that the carpets are clean and in good condition.  

How Appraisers Handle Extraordinary Assumptions 

When you fill out a standardized GSE appraisal report, only FHA assignments require you to recommend inspections and repairs for areas about which you made extraordinary assumptions and hypothetical conditions. Just check the box that states “the appraisal is subject to a required inspection” based on your findings and assumptions, and suggest a professional (home inspector, structural engineer, etc.) to do the job.   

Professional Standards & Ethics 

USPAP requires that you disclose all assumptions — extraordinary or otherwise — for each assignment. They don’t specify how exactly to include these, except that they must be clear and conspicuous.  

Attach an extra page detailing your findings, if necessary. As long as your client is aware of and can easily refer back to these assumptions, you’re in the clear. 

Legal Implications of Extraordinary Assumptions 

Luckily, general assumptions and appraisal’s scope of work cover liabilities for appraisers, most of the time. That means you don’t have to make a number of extraordinary assumptions in your reports as a way to protect yourself. Instead, they should be limited to when you have been made aware of a potential concern on a specific assignment. Don’t use them as an excuse to avoid proper research on any conditions, or due diligence, either. 

Here’s Another Extraordinary Assumption For You... 

If we make the extraordinary assumption that you’ve made it this far and liked what you read, you’ll want to check out our blog for more on the ins and outs of property appraisal. Start your career in appraisal, or take your license to the next level with courses that are built for your busy lifestyle.