Can an appraiser use an extraordinary assumption that a residential property is zoned for commercial use when valuing the property?

Using an extraordinary assumption regarding a residential property's zoning being utilized for commercial purposes is allowable as long as it is properly disclosed in the appraisal report. An extraordinary assumption is defined as an assumption that, if found to be false, could alter the appraiser's opinions or conclusions. In this case, if the appraiser assumes that the property is zoned for commercial use, despite its actual zoning being residential, they must clearly disclose this assumption in the appraisal report.

By doing so, the appraiser provides transparency to the clients and stakeholders involved, ensuring that they are aware of the basis on which the valuation was concluded. Additionally, it’s crucial that the extraordinary assumption is reasonable and supported by sufficient evidence that it may indeed be viable for the property to be used commercially, such as potential rezoning possibilities. Therefore, by disclosing the assumption, the appraiser protects themselves from liability and misinterpretation of the appraisal results.