| American Society of Appraisers: Philadelphia Chapter Serving Pennsylvania, New Jersey |
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 American Society of Appraisers — Philadelphia Chapter — George D. Sinclair
Ask George About George He was ASA's International President in 1974-75. He also served as a Regional Governor, member of the Machinery and Technical Specialties, Ethics, Reaccreditation and Publications committees, and represented ASA as a member of the Appraisal Foundation Advisory Council. A resident of Drexel Hill, PA, he was the retired owner of the Keystone Appraisal Company until his death in 2005 of injuries suffered in an automobile accident. In Memoriam Sinclair Award (Chapter 035) Sinclair Award Recipients Sinclair Fund (ASA) Sinclair Scholarships (WTS)
We appraise:
• Personal Property • Real Estate • Gems & Jewelry • Business Valuation • Machinery/Specialties |
Ask George
A Although USPAP does not directly address the appraisal issues associated with catastrophic events, the following passages may be especially important in appraisals involving properties in markets that are changing rapidly, for any reason. Standards Rule 1-2(e) requires an appraiser to identify economic attributes relevant to the subject property. Standards Rule 1-3(a) specifically requires analysis of supply and demand. For Self-Contained and Summary Appraisal Reports, USPAP requires disclosure of economic property characteristics relevant to the assignment. Market conditions (including sudden market changes related to catastrophic events) are economic property characteristics, and so should be identified in the development of an appraisal and disclosed in the appraisal report. Standards Rules 2-2(a)(v) and 2-2(b)(v) address the type and definition of value used in an assignment. The Comments to these Standards Rules state, in part: "Stating the definition of value also requires any comments needed to clearly indicate to intended users how the definition is being applied." In cases of sudden market change, it would be necessary to specifically disclose such things as how the appraisal has addressed the motivation of buyers and sellers, supply and demand, the conditions of the sale (e.g. exposure in a competitive market), etc. As noted in STANDARD 2, the content of all real property appraisal reports, must be consistent with the intended use of the appraisal In the case of a rapidly changing market, the report must have enough information to allow intended users to understand the market conditions and to use that information in their decision making. TopA A single appraisal review assignment can include the review of several appraisal reports, with the assignment results presented in one appraisal review report. Similarly, a single appraisal report can provide assignment results for an appraisal that includes several properties. TopA In the sale of an appraisal practice, the selling appraiser must comply with the Confidentiality and Record Keeping sections of the Ethics Rule. The confidentiality section of the Ethics Rule states:
The Record Keeping section of the Ethics Rule states:
TopQ What is the Date of Appraisal? A The date of the appraisal is an ambiguous term. The appropriate terminology is the effective date of the appraisal or the date of the report. TopQ Is the effective date of the appraisal the same as the date of value? A Yes. TopQ Who is the Appraiser's client? A The client is the party or parties who engage an appraiser (by employment or contract) in a specific assignment. It is engagement for an assignment, not payment for an assignment that establishes the appraiser-client relationship. TopA USPAP does not specifically address the requirements for such an amendment. However, as in any communication of assignment results, an appraiser must be mindful of the obligation to not mislead and to not knowingly permit an employee or other person to communicate a misleading or fraudulent report. Therefore, accomplishing the amendment requires careful attention to these obligations. The problem could be resolved in a number of ways: In preparing any form of an amendment, an appraiser must also keep in mind the requirements in the Conduct section of the Ethics Rule, which states, in part: "An appraiser must not communicate assignment results in a misleading or fraudulent manner" and must not accommodate the interests of the client. As such, in any amendment to, or revision of, a prior appraisal report, an appraiser must provide any new or corrected information in a clear, objective and impartial manner. TopA In order to provide this information, you must satisfy the Confidentiality section of the Ethics Rule. This section states: "An appraiser must protect the confidential nature of the appraiser-client relationship. An appraiser must act in good faith with regard to the interests of the client in the use of confidential information and in the communication of assignment results. An appraiser must not disclose confidential information or assignment results prepared for a client to anyone other than: The comment further explains that if all essential elements of confidential information are removed through redaction or the process of aggregation, client authorization is not required for the disclosure of the remaining information, as modified. In this case your options are: Statement No. 5 in USPAP addresses the Confidentiality section of USPAP. It stresses that all opinions and conclusions, developed specific to an assignment are confidential. Assignment results are an appraiser's: TopA The appraiser doing this must understand the requirements of the statement on Appraisal Standard #8 (SMT-8) as contained in USPAP. On summary, this standard, which has the full weight of a standards rule, states that: "An electronically transmitted report is a written report and must meet the USPAP reporting requirements." However, if you do an electronically transmitted report, you must comply with the Record Keeping section of the Ethics Rule of USPAP. This section applies to all reports and permits storage on electronic, magnetic or other media. A true electronic and/or paper copy of the transmission must be retained by the appraiser. A paper copy of an electronically transmitted report is not required. TopA The answer is no. The Confidentiality section of the Ethic Rule of USPAP states that: "An appraiser must protect the confidential nature of the appraiser-client relationship." Appraisers may disclose information relating to the assignment to: the client and persons specifically authorized by the client: such third parties as may be duly authorized by law; and a duly authorized peer review committee. In this instance, the appraiser must receive authorization from the client prior to sharing confidential information with the client's associated. It must be noted that the same answer would be applicable to a real property appraisal, a mass appraisal or a personal property appraisal. The USPAP Standards and Ethics Rule apply to all appraisal report. TopA According to the Appraisal Standards Board, it would be ethical provided that the appraiser discloses the payment of that fee in the appraisal report. The Management section of the Ethics Rule of USPAP states that: "The payment of undisclosed fees, commissions, or things of value in connection with the procurement of appraisal, review, or consulting assignments is unethical." However, the real property appraiser must be aware that the Certified Real Estate Appraiser Law, Act 98 of 1990, prohibits such payments. Section 11, Disciplinary & Corrective Measures, states that the Board may deny, suspend or revoke certificates, or limit or reprimand a certificate holder for a violation of this practice which is covered by Article 14 which reads as follows: "Contracting for or accepting compensation for appraisal services in the form of a commission, rebate, division of brokerage commissions or any other similar form." TopA First, an appraiser may make an appraisal subject to extraordinary assumptions or hypothetical conditions. However the appraiser must understand the difference between the two. An extraordinary assumption is defined in USPAP as an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis. A hypothetical condition is defined in USPAP as that which is contrary to what exists, but is supposed for the purpose of analysis. Hypothetical assumptions assume conditions contrary to known facts about physical, legal or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis. If you, the appraiser, cannot verify or confirm the assumed condition, and that condition is critical to the valuation, but yet you believe it is true and have no reason to doubt that it is true, then that condition is an extraordinary assumption. Then you must comply with the appropriate standards that cover both the development and reporting of the condition. If, however, you are asked to assume a condition that you know to be false, then you are required to do the following: If the assumed condition in question is known or believed to be false, then it is a hypothetical condition. On the other hand, it would be an extraordinary assumption when you believe it is reasonable to believe that the assumed condition is true. TopA The answer to your question is no, not under the conditions you describe. The Jurisdictional Exception Rule is the "savings clause" in USPAP, available when a part or parts of the USPAP are contrary to law or public policy. The Jurisdictional Exception Rule states: "If any part of these standards is contrary to law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction." A request or instructions from an attorney are not the equivalent of law or public policy without specification of law or public policy in question. Attorneys are experts in the practice of law, but it is legislative bodies and the courts that make law and regulators who make public policy. It must be understood that the Jurisdictional Exception Rule applies whether you are making an appraisal, conducting an appraisal review, or performing a consulting assignment. It would be possible to appraise the property if you made the appraisal subject to a hypothetical condition that the property was clean. However, this hypothetical condition must be stated in your report in a clear manner that would not be misleading. TopA With the advent of The Antiques Roadshow on TV, this scenario seems to occur quite often. The professional appraiser is aware of how his behavior in a client's home influences not only his own credibility but that of the profession as a whole. Having a certain amount of psychological insight into human nature is just as important to a client relationship as having an in-depth knowledge of an appraisal specialty. For example, it is appropriate for the appraiser to recognize and respect a client's sentimental attachment to family heirlooms, regardless of monetary value, and thus to project to the client a respect for their family historical associations, while at the same time being able to teach the difference between sentimental association and actual monetary value. The way an appraiser handles the objects, regardless of taste level, monetary value, or even stress level in the face of cataloging multiple objects is essential in forming an atmosphere of trust and comfort. Being thoughtful and non-judgmental in dialogue with the client can go a long way in establishing trust and diplomatic relations. This will be measured well into the future in terms of whether or not a client's trust and respect have been earned to a point at which the client willingly and unreservedly refers new business to the appraiser in years to come. Top |