Vermont Mortgage Bankers Association
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ADVISORY OPINION 27 (AO-27)
SUBJECT: Appraising the Same Property for a New Client
APPLICATION: Real Property, Personal Property, and Intangible Property
THE ISSUE: Situations often arise in which appraisers who have previously appraised a property are asked by a different party to appraise the same property. In some instances this request arises very soon after the first appraisal; in others, it may be months or years later. Under what circumstances can an appraiser accept an assignment to appraise a property for a prospective client when that appraiser has previously completed an appraisal of the same property for another client?
ADVICE FROM THE ASB ON THE ISSUE:
Relevant USPAP & Advisory References
Relevant USPAP & Advisory References§ Confidentiality section of the ETHICS RULE. § Statement on Appraisal Standards No. 9 (SMT-9), which addresses intended use and intended users in an assignment. § Advisory Opinion 25 (AO-25) which covers clarification of the client in a federally related transaction. § Advisory Opinion 26 (AO-26) which addresses reappraising/transferring a report to another party.
Accepting the assignment from the second potential client is not prohibited by USPAP, assuming any existing confidential information is handled properly.
Several parts of the Confidentiality section of the ETHICS RULE are pertinent to this matter.
An appraiser must not disclose . . . assignment results prepared for a client to anyone other than the client and persons specifically authorized by the client . . .
An appraiser cannot disclose the results of a particular assignment, performed for a particular client, to anyone other than those designated by that client. However, an understanding of the definitions of assignment, assignment results, and client are key to a complete understanding of this requirement.
Assignment – a valuation service provided as a consequence of an agreement between an appraiser and a client
Client – the party or parties who engage an appraiser (by employment or contract) in a specific assignment
Assignment Results – an appraiser’s opinions and conclusions developed specific to an assignment
As can be seen in the definitions, both the client and the assignment results are specific to an assignment. If there is a new potential client, valuation services performed for that new client would constitute a new assignment and the assignment results would be specific to that new assignment. Therefore, acceptance and performance of the new assignment to appraise the same property would not be considered revealing the first client’s assignment results to the second client, even if the value conclusions were the same. It should be noted that the value conclusion could easily be different if the effective date or the scope of work changed in any manner. It should also be noted that USPAP requires the appraiser to provide an unbiased opinion of value to each client.
Obtaining a ReleaseAs a matter of business practice, some appraisers request a release from a prior client before accepting an assignment to appraise the same property for a new client or to disclose the assignment for the second client to the first client. However, USPAP does not require this. Also, appraisers should be aware that, in some cases, informing a client about the existence of another client and the fact that the property was appraised for that other client may not be compliant with the portion of the Confidentiality section of the ETHICS RULE, which states:
An appraiser must protect the confidential nature of the appraiser-client relationship.
Confidential InformationIn all assignments the appraiser must comply with the Confidentiality section of the ETHICS RULE with respect to the handling of confidential information. Confidential information is defined in USPAP as: information that is either § identified by the client as confidential when providing it to an appraiser and that is not available from any other source; or § classified as confidential or private by applicable law or regulation
The Confidentiality section of the ETHICS RULE states:
An appraiser must be aware of, and comply with, all confidentiality and privacy laws and regulations applicable in an assignment.
An appraiser must not disclose confidential information . . . . to anyone other than the client and persons specifically authorized by the client . . .
If a prior assignment included any confidential information, its disclosure to a different client or intended user would violate the ETHICS RULE if the information were still classified as confidential information. This includes the requirement to comply with all confidentiality and privacy laws and regulations.
Client ExpectationsAt times, an appraiser’s client may believe that his or her legitimate business intent could be harmed by that appraiser providing an appraisal of the subject property of that assignment to another client. In such cases, the client and the appraiser may stipulate in their service agreement the conditions under which the appraiser may or may not appraise the same subject property. A client involved in litigation may stipulate that the appraiser cannot appraise a subject property for the opposing party in that litigation. As another example, if an appraiser is providing the value of a property to a client who is planning to sell that property in an auction, the appraiser and client may agree that the appraiser will not appraise the same property for a party planning to participate in the bidding process.
IllustrationsExample A - Litigation An appraiser performs an appraisal for a client involved in litigation and then is requested to appraise the same property for the opposing party. Is accepting the assignment for the second client prohibited by USPAP?
Example B – Competing Banks If an appraiser has appraised a property for Bank A and then is approached by Bank B to appraise the same property, does USPAP prohibit acceptance of the second assignment?
This Advisory Opinion is based on presumed conditions without investigation or verification of actual circumstances. There is no assurance that this Advisory Opinion represents the only possible solution to the problems discussed or that it applies equally to seemingly similar situations.
Approved June 27, 2003 |
Send mail to info@vermontmba.com with questions or comments about this web site.Last modified: February 03, 2004
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