Illustrations (AO-28)

1. A real property appraiser is engaged to appraise the market value of a twelve-unit apartment building. The appraiser initially decided that the scope of work should include the inspection of two of each of the three unit types (studio, one- and two-bedroom). In the course of conducting the inspection, the property manager had a key for only one of the two-bedroom units; thus the appraiser was not able to inspect one of the two-bedroom units as planned.
   
   The scope of work, which includes the degree of inspection, was affected in this assignment because of lack of access. If the appraiser decides that she has sufficient information to produce credible assignment results, the appraiser can complete the appraisal based on the inspection completed. The report would include a description of the scope of work performed, stating that five units had been inspected.
   
    

2. A personal property appraiser was engaged to appraise four sets of china. The intended use of the report was for litigation regarding an estate. The client requested that all pieces of each set of china be inspected, since one cause of action claimed that several pieces were damaged.
   
   When the appraiser contacted the estate’s administrator to arrange for inspection, he was told that one set of china was in storage and could not be retrieved until after the Court’s deadline for the submission of expert reports.
   
   In this case, assignment conditions have changed the appraiser’s scope of work. The appraiser may not have sufficient information to produce credible assignment results in the context of the intended use. The appraiser should consult with the client on the proper course of action. The appraiser may alter the scope of work to include the appraisal of only the three sets of china available for inspection or use an extraordinary assumption regarding the condition of the fourth set.
   
    

3. A business appraiser is appraising a closely held business enterprise with real property and personal property assets. In the course of the assignment, the appraiser’s research indicates that the market for the company’s product is declining and management’s projections are not supported. Therefore, the appraiser believes the company might be worth more in liquidation than as a going concern, which would make performance of the work addressed in Standards Rule 9-3 necessary for credible assignment results.
   
   The scope of work must be modified because of what the appraiser learned in the course of performing research and analyses.
   
    

4. A real property appraiser is contacted by a potential client to appraise an occupied manufacturing facility. The client requests that the occupants not be disturbed by a property inspection.  Additionally, the client requests that the cost approach be performed in the appraisal of the building.  These requests are assignment conditions and will be part of the appraiser’s identification of the problem to be solved and determination of the appropriate scope of work.
   
   Accepting and completing this assignment requires the appraiser to:

• Determine that the client’s assignment conditions do not limit the scope of work to such a degree that assignment results are not credible in the context of the intended use;

• Gather information on relevant characteristics by means other than inspection and/or use extraordinary assumptions;

• Include a cost approach in the scope of work, even if this approach is not otherwise necessary for credible assignment results; and

• Properly reconcile the applicability or suitability of the cost approach in arriving at the value conclusion.

5. A real property appraiser accepted an assignment to appraise a three-unit residential property. The intended use of the appraisal was for mortgage financing.  The client requested that the appraiser not verify the legal status (e.g., compliance with zoning, building codes, use permits) of the three units with municipal officials.
   
   The appraiser withdrew from the assignment because she concluded that the client’s assignment condition limited the scope of work to such a degree that assignment results are not credible in the context of the intended use. The use of an extraordinary assumption about the legal use of the property would not produce credible assignment results in the context of the mortgage financing use.
   
    

6. An appraiser was engaged to appraise a one-unit residence.  Based on the appraiser’s identification of the appraisal problem, the appropriate scope of work was determined to include development of the sales comparison approach and cost approach. However, at the time of the inspection the appraiser discovered that the property was not a one-unit, but instead a three-unit property.
   
   Based on this new information, the appraiser re-considered the appraisal problem and the appropriate scope of work. The change in relevant property characteristics for the subject property significantly changes the appropriate scope of work; the initially planned scope of work is no longer suitable and would not produce credible assignment results. The type of data to be researched and the type of analysis to be applied changed when the property type changed from a single-unit to a three-unit.
   
   A new appraisal problem requires reexamination of the scope of work.  The appropriate scope of work for the new appraisal problem includes an income approach, and the cost approach is not necessary for credible assignment results.
   
   The appraiser should consult with the client since the appraisal problem has changed.  

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