Hypothetical Condition
A condition that is contrary to known fact but is assumed for the purpose of analysis. Unlike an extraordinary assumption (which assumes uncertain information), a hypothetical condition assumes something known to be untrue.
Hypothetical conditions are used when the client needs a value based on conditions that don't exist. Examples: valuing a property "as if complete" when construction is only 50% finished, valuing a property "as if vacant" when it has improvements, or valuing a property "as if rezoned" when the current zoning is different. The appraiser must clearly disclose the hypothetical condition and explain its purpose. The appraisal is valid only under the stated hypothetical condition. Both extraordinary assumptions and hypothetical conditions must be prominently disclosed in the report.
Related Terms
Extraordinary Assumption
An assumption that is directly related to a specific assignment and, if found to be false, could alter the appraiser's opinions or conclusions.
As-Is Value
The value of a property in its current physical condition, as of the effective date of the appraisal, without any hypothetical conditions or extraordinary assumptions about future improvements or changes..
Prospective Value
A forecast of a property's value at a future date, based on anticipated changes in market conditions, property improvements, or other factors.
Scope of Work
The type and extent of research and analysis performed in an appraisal assignment.
More in Appraisal Process
View allEffective Date (Date of Value)
The date on which the appraiser's opinion of value applies.
Intended Use
The use or uses of an appraiser's reported appraisal or appraisal review as identified by the appraiser based on communication with the client at the time of the assignment.
Engagement Letter
A written agreement between the appraiser and client that outlines the terms of the appraisal assignment, including the property, intended use, scope of work, fee, timeline, and any special conditions..
Retrospective Appraisal
An appraisal with an effective date in the past.