Policies & Procedures

To all clients including banks, mortgage companies, appraisal management companies, and any other person or company contracting with us to perform an appraisal assignment:At Accurate Appraisals Inc. we strive to follow local laws and the Uniform Standards of Professional Appraisal Practice (U.S.P.A.P.). All of the appraisal assignments with interior inspections will have interior photos of the subject property including, but not limited to: any and all deferred maintenance, damage, and items that are not normal wear for the home being appraised. Please do not request us to remove any photos from any report, or ask us to over look any external influences of the subject property.

Be sure you know who the client is before ordering the report. If the client changes this will require a new assignment, thus a new report with a new effective date, and a new fee. It is a violation of U.S.P.A.P. to change a client’s name on a report after the report has been delivered. Please refer to Advisory Opinions #26 and #27 for explanation. For your convenience these are outlined below. The appraisal foundation has a copy of U.S.P.A.P. on line for review. http://www.appraisalfoundation.org

It is a violation of U.S.P.A.P. to perform an appraisal with a predetermined value. Please do not ask us to give you a value, or value range of a property before the appraisal is completed. In the state of Michigan, you can take the State Equalized Value (S.E.V.) of a property, and multiply it by two for an idea of what the state has the home valued at. There is no guarantee that the appraisal will match, be higher, or lower than this number. This number is just a reference point. Many local municipalities have this information online, please refer to our LINKS page for the ones we have found.

ADVISORY OPINION 26 (AO-26)

  • This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations, and to offer advice from the ASB for the resolution of appraisal issues and problems.

SUBJECT: Readdressing (Transferring) a Report to Another Party
APPLICATION: Real Property, Personal Property, and Intangible Property
THE ISSUE: After an assignment has been completed and the report has been delivered, an appraiser may be asked to “readdress” (transfer) the report to another party.  Does USPAP allow an appraiser to “readdress” (transfer) a report by altering it to indicate a new recipient as the client or additional intended user when the original report was completed for another party

Relevant USPAP & Advisory References (AO-26)

  • The Confidentiality and Conduct sections of the ETHICS RULE.
  • Standards Rules such as 1-2(a) and 1-2(b); 7-2(a) and 7-2(b); and 9-2(a), which require an appraiser to identify the client, intended users, and intended use.
  • Standards Rules such as 2-1(a), 8-1(a), 10-1(a), which require an appraiser to clearly and accurately set forth the appraisal in a manner that is not misleading.
  • SUPPLEMENTAL STANDARDS RULE, which requires an appraiser to ascertain whether supplemental standards apply to the assignment in addition to USPAP.
  • Statement on Appraisal Standards No. 9 (SMT-9), which requires the appraiser to identify and disclose the client and intended users and the intended use in an appraisal, appraisal review, or appraisal consulting assignment.
  • Statement on Appraisal Standards No. 10 (SMT-10), which describes applicability of USPAP in federally related transactions.
  • Advisory Opinion 25 (AO-25), which covers clarification of the client in a federally related transaction.
  • Advisory Opinion 27 (AO-27), which addresses appraising the same property for a new client.
    No. Once a report has been prepared for a named client(s) and any other identified intended users and for an identified intended use, the appraiser cannot “readdress” (transfer) the report to another party.
  • USPAP defines the Client as: The party or parties who engage an appraiser (by employment or contract) in a specific assignment  (bold added for emphasis).
  • Assignment is defined as: A valuation service provided as a consequence of an agreement between an appraiser and a client (bold added for emphasis).
  • Intended Use is defined as: The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment (bold added for emphasis).
  • Intended User is defined as: The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment (bold added for emphasis).
  • Identification of the client, any other intended users, and the intended use are key elements in all assignments. Because these identifications drive the appraiser’s scope of work decision, as well as other elements of the assignment, they must be determined at the time of the assignment. They cannot be modified after an assignment has been completed. See Statement on Appraisal Standards No. 9 (SMT-9) for further clarification.
  • Illustrations (AO-26)

Question #1
An appraiser was engaged by Client A to appraise a property.  The appraiser delivered the appraisal report to Client A. The client has decided not to pursue the transaction that generated the need for the appraisal report.  The appraiser is contacted by Client B. Client B requests that the original report be readdressed (transferred) by replacing Client A’s name with Client B’s name in the report.   Is this acceptable?

Answer: No. Simply changing the client name on the report cannot change or replace the original appraiser-client relationship that was established with Client A. Therefore, this action is misleading.

Question #2

How can this circumstance be handled according to Standards?

Answer: The appraiser can consider Client B’s request as a new assignment. In so doing, the appraiser may establish a new appraiser-client relationship with Client B and appraise the property for this new client. Important considerations, i.e., confidential information and other factors are further addressed in AO-27 – “Appraising the Same Property for a New Client”.

Question #3
Why might Client B want their name on the report that was completed for Client A?

Answer: Client B may want to establish an appraiser-client relationship because it provides all the rights, obligations, and liabilities such a relationship places on the appraiser.

A prudent method to establish an appraiser-client relationship is to have a written engagement letter or contract with any client at the time of the assignment.

ADVISORY OPINION 27 (AO-27)

This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems.

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?

Relevant USPAP & Advisory References (AO-27)

  • 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 Release (AO-27)
As 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 Information (AO-27)
In 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 Expectations (AO-27)
At 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.

Illustrations (AO-27)
Example 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?

Answer: No, assuming confidential information is handled correctly. However, there are common business practices in such circumstances. Often, the opposing parties each hire an appraiser to appraise the subject property.  If the opposing parties do not plan to hire one appraiser jointly, each party could make it a part of the agreement between the appraiser and the client (the engagement letter or contract) that the appraiser is not to appraise the property for anyone representing the opposing side of the legal action.

In the absence of such an agreement between the client and the appraiser, the appraiser should consider the presence of confidential information.  The knowledge of confidential information may prevent the appraiser from accepting the second assignment. The appraiser must decline the second assignment if:

  • the appraiser used confidential information in performing the first assignment;
  • that information would not be available from any other source; and
  • credible results cannot be derived without the use of this confidential information.

However, the appraiser may accept the second assignment, making sure to not disclose any confidential information from the original assignment to the second client, if

  • The information is available from another source (meaning it is not confidential information, as defined); or
  • The confidential information is not material to deriving credible assignment results.

However, the appraiser must ensure that confidential information is not disclosed, even if it has no impact on the assignment results (such as the litigation strategy of attorneys representing the first client).

 

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?

Answer: No, assuming confidential information is handled correctly. This constitutes a second assignment, a new client and a new agreement between a client and an appraiser.