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Hypothetical and Extraordinary Assumptions in USPAP

June 25, 2014

The Uniform Standards of Professional Appraisal Practice (USPAP), to which every CMEA adheres, discusses two types of assumptions professionals make when performing appraisals. These are extraordinary and hypothetical assumptions.

Extraordinary assumptions are directly related to an appraiser’s specific assignment. If these assumptions are discovered to be false, the appraiser would be forced to change his opinion or conclusion. Extraordinary assumptions take uncertain information, such as physical, legal, or economic characteristics of equipment, and presume that information to be fact. Market conditions and trends also fall under extraordinary assumptions.

Hypothetical assumptions are contrary to fact, but are still entertained for an analysis. They take facts about physical, legal, and economic conditions, and assume the contract. Hypothetical assumptions about market conditions or trends can also be taken.

These distinctions are important ones, so make sure if you need an appraisal you work with an experienced and well-trained CMEA.

TheNEBB Institute endorses and strives to observe the highest standards of professional ethics to preserve the public trust inherent in the professional appraisal practice. The Institute provides initial and monthly comprehensive education, ongoing support, and a dynamic international network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.

By:NEBB Institute

 

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