When an appraiser provides a current value opinion on a proposed new building, he or she is utilizing a(an) ________ that the proposed improvements are completed as of the effective date of the appraisal.

• A. Extraordinary assumption.
• B. Principal assumption.
• C. Condition of sale.
• D. Hypothetical condition.

Answer: (D)

When valuing a proposed building that doesn’t exist yet, the appraiser uses a hypothetical condition. This means performing the analysis as though the improvements are already completed and in place as of the appraisal’s effective date, even though they aren’t in reality. This approach lets the appraiser isolate the value attributable to the finished improvements without being blocked by their current absence, and it must be clearly stated in the report because the conclusion depends on that assumption. If the improvements aren’t actually completed, the value could be different, which is why it’s described as contrary to known facts.

The other options don’t fit this scenario. An extraordinary assumption is something treated as true for the purposes of the assignment, but not necessarily contrary to facts; if it’s false, results may change, which isn’t the same as analyzing a hypothetical completed state. A principal assumption concerns general conditions rather than a specific scenario, and a condition of sale relates to the terms of a sale rather than the hypothetical completion of improvements.