Extraordinary Assumption

Real property appraisal assignments can be completed based on one or more assumptions, that have a presumed uncertainty, that are called extraordinary assumptions.  Appraisers take care to prominently disclose to readers of an appraisal when an extraordinary assumption or assumptions have been made.  Without disclosure a reader of an appraisal report may be led to believe that a property has existing improvements or conditions in its "as is" state, and the failure to disclose could be found to be misleading.

Appraisers can also complete appraisal reports when hypothetical conditions have been employed.  As an example; subdivision lots that lack roads, water lines, sewer lines and power could be appraised as if the lots were, for analytic purposes, in their "finished" condition with the improvements completed.  The improvements do not exist, but the hypothetical conditions are asserted for appraisal purposes.

Appraisal assignments generally include a value opinion being express for the property in its "as is" state and in its "upon completion" state subject to extraordinary assumptions or hypothetical conditions.  

It is important to note that when extraordinary assumptions are proven wrong, or are false, the value opinions / conclusions of an appraisal report based on those assumptions no longer holds true.  Thus, if we discover that a property is contaminated, but we were uncertain before the discovery and made an extraordinary assumption that no contamination existed, the assumption was proven wrong and the opinion concluded is no longer a valid one.  

It is incumbent upon an appraiser to make only extraordinary assumptions or consider only hypothetical conditions that are reasonably probable.  If, for example, an appraisal is completed with the assertion that commercial zoning will be approved for the site, yet no planning, zoning or other information reasonably supports a possible change in zoning, the report becomes entirely fictional and can not be relied upon.  

Contact us with your questions or concerns regarding extraordinary assumptions or regarding your appraisal assignment in Nevada via e-mail at grigdon@cox.net or by phone at 1-702-568-6699. 

Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.