By TJ McCarthy, SRA

The Appraisal Standards Board has made revisions to the Conduct section of the Ethics Rule of USPAP that will become effective January 1, 2010. The specific language that has been added to the Ethics Rule is:

If known prior to accepting an assignment, and/or if discovered at any time during the assignment, an appraiser must disclose to the client, and in the subsequent report certification:

·        any current or prospective interest in the subject property or parties involved; and

·        any services regarding the subject property performed by the appraiser within the three year period immediately preceding acceptance of the assignment, as an appraiser or in any other capacity.

Comment: Disclosing the fact that the appraiser has previously appraised the property is permitted except in the case when an appraiser has agreed with the client to keep the mere occurrence of a prior assignment confidential. If an appraiser has agreed with a client not to disclose that he or she has appraised a property, the appraiser must decline all subsequent assignments that fall within the three year period.

This disclosure requirement will allow a prospective client to know, at the time of the assignment, whether the appraiser is performing, or has performed, other services with regard to the property, such as property management, leasing, brokerage, auction, investment advisory services, etc. thus allowing the client to determine potential conflicts. 

At least that’s what the ASB thinks.  Personally, I think this Rule change is going to create more problems than it is trying to prevent.  Don’t get me wrong, I’m sure many users of appraisal services will like this disclosure for many reasons.  I’m just concerned about what will come next once the appraiser opens this Pandora’s Box.  Maybe this…

-          When did you appraise this property?

-          Who did you appraise this property for?

-          What was the opinion of value?

-          How much did you get paid?

-          We want a discount since you did this appraisal 2 years ago.

-          Send us a copy of that report.

-          We are going to use someone else…thanks for letting us know.

…and I’m only talking about appraising it in the past three years.  I’m sure it could get more complicated if you provided any other non-appraisal related service.

The Rule also states:

“If an appraiser has agreed with a client not to disclose that he or she has appraised a property, the appraiser must decline all subsequent assignments that fall within the three year period.”

I don’t like the fact that this Rule change would now restrict an appraiser from accepting this assignment. 

The ASB wrote a Q and A regarding this Rule change in April, 2009.  I would urge every appraiser to read the Q & A at the following link.  It gives general direction that some may find useful.

http://www.appraisalfoundation.org/s_appraisal/bin.asp?CID=12&DID=1351&DOC=FILE.PDF

For example, how should the appraiser disclose a prior appraisal or service to the client at time of engagement?  Email, oral, fax, etc? The following is the ASB’s response.

USPAP does not specify how the disclosure upon acceptance or discovery must be made. It may be appropriate in some cases to provide an initial oral disclosure. If the client decides to proceed, it may be appropriate that the appraiser’s disclosure be restated in writing. One way to accomplish this is by including it in a letter of engagement. In other cases an email would be appropriate.

The Record Keeping section of the ETHICS RULE requires that the appraiser’s workfile include “all data, information, and documentation necessary to…show compliance with this Rule...” So, the disclosure prior to acceptance or upon discovery must be documented in the appraiser’s workfile.

I have written the following additional Certifications, which I will be including in my reports, to comply with the ASB's revisions to the Ethics Rule.  I would recommend keeping any additional Certification language simple. 

If the appraiser provided a prior Appraisal

Additional Appraiser’s Certification

Pursuant to the Conduct Section of the Ethics Rule of USPAP, “If known prior to accepting an assignment, and/or if discovered at any time during the assignment, an appraiser must disclose to the client, and in the subsequent report certification any services regarding the subject property performed by the appraiser within the three year period immediately preceding acceptance of the assignment, as an appraiser or in any other capacity.” 

I have previously appraised this property in the three years prior to this assignment. 

The appraiser is not aware of any other services, as an appraiser or in any other capacity, performed on the subject property within the past three years.

If the appraiser provided a prior Service

Additional Appraiser’s Certification

Pursuant to the Conduct Section of the Ethics Rule of USPAP, “If known prior to accepting an assignment, and/or if discovered at any time during the assignment, an appraiser must disclose to the client, and in the subsequent report certification any services regarding the subject property performed by the appraiser within the three year period immediately preceding acceptance of the assignment, as an appraiser or in any other capacity.” 

I have provided a previous service regarding the subject property within the three years prior to this assignment.

If the appraiser provided no prior Service or Appraisal

Additional Appraiser’s Certification

Pursuant to the Conduct Section of the Ethics Rule of USPAP, “If known prior to accepting an assignment, and/or if discovered at any time during the assignment, an appraiser must disclose to the client, and in the subsequent report certification any services regarding the subject property performed by the appraiser within the three year period immediately preceding acceptance of the assignment, as an appraiser or in any other capacity.” 

I have not provided any previous services regarding the subject property, including an appraisal, within the three years prior to this assignment.

USPAP does not require the appraiser to include a certification like the one above if there has been no prior service or appraisal in the past three years.  I will probably be putting it in my reports so there will be no question that I researched and addressed the issue for my client or any other entity that may view my report (State Appraisal Board, other intended users, etc.)