Appraisal Ethics and Confidentiality: Who Is My Client?
“Why can’t you just tell me the value? I paid for the report, so why can’t you just give me a copy of it?” Do these questions sound familiar to you? Do you ever have a hard time explaining to borrowers that you’re not trying to make things difficult for them, you’re just following the rules to keep your appraising license? Do you find yourself sometimes even wondering if you’re being a little too stingy or a little too lenient with information you share? IVG’s Chief Appraiser Barry Locke addressed this issue in a recent webinar for IVG’s staff appraisers, and IVG’s blog is here to spread the wealth of knowledge.
The Client is the party who hires an appraiser for a specific assignment
This relationship carries significant implications regarding trust, confidentiality, disclosure, and liability. In cases where an appraisal management company (AMC) is involved, the AMC serves as the agent for the party seeking the appraisal and is identified as the appraiser's client. However, there is nothing in USPAP preventing either the AMC or the AMC's client from being identified as the appraiser's client.
It is important to note that the client has a crucial role in the appraisal process. They are responsible for providing the appraiser with accurate and relevant information about the property being appraised; this information helps the appraiser to form a well-informed opinion of value. The client must also ensure that the appraiser is given access to the property so that they can carry out a thorough inspection. This contact might be another person not listed on the report, such as a real estate agent or the homeowner selling the property.
Liability is another important aspect of the client-appraiser relationship. The client must understand that the appraiser's opinion of value is based on the information they have been provided. If the information is inaccurate or incomplete, the appraiser's opinion of value may be compromised.
In summary, the client-appraiser relationship is based on trust, confidentiality, disclosure, and liability. The client must provide the appraiser with accurate and relevant information, ensure access to the property, and understand their responsibilities regarding confidentiality and liability. The appraiser, in turn, must provide an unbiased opinion of value based on the information provided.
Is the AMC or the Lender the client for this report?
Intended users of the appraisal report are identified by the appraiser, based on communication with the client at the time of the assignment. The Client is always an intended user for an appraisal/appraisal review assignment; however, not all intended users may be clients. The appraisal report should be tailored to meet the needs of the intended users. In a mortgage finance transaction, only the lender/client or intended user may rely on the appraisal report. Borrowers, assignees, GSE's, and secondary market participants are "rely-ers," but not intended users.
It's important to note that the appraiser's certification acknowledges that certain parties in a mortgage finance transaction that are not the lender/client or intended user may rely on the appraisal report. However, the appraiser may only discuss or share assignment results and confidential information with the client.
Assignment Results and Confidential Information
The appraiser has the obligation to maintain confidentiality regarding assignment results and can only disclose them to clients. Confidential information in an appraisal refers to non-public data obtained from the client.
As an appraiser, it is important to understand the regulations that govern your profession. The Ethics Rule in USPAP is one such regulation that sets out the guidelines that appraisers must follow when dealing with confidential information. In accordance with this rule, appraisers are required to safeguard the confidential nature of their relationship with their clients and are prohibited from disclosing any confidential information or assignment results to unauthorized parties.
However, not all data is considered confidential. Physical characteristics of a property, which can be easily observed or measured, are not part of the appraiser's professional judgment and analysis and are therefore not considered confidential. Such data may include information about the size, shape, location, and condition of the property.
It is important for appraisers to understand the distinction between confidential and non-confidential data and to ensure that they are always in compliance with the Ethics Rule in USPAP. By doing so, appraisers can protect the interests of their clients and maintain the integrity of their profession.
Is the Owner/borrower an intended user?
The intended user of an appraisal report is the lender/client, according to FNMA guidelines. The appraiser's certification acknowledges that parties other than the lender/client may rely on the report, but they are not intended users. At the end of the day, the appraiser is only permitted to share assignment results and confidential information with the client.
This means that as an appraiser, the report produced is primarily for the benefit of the lender or client who initiated the appraisal process. They are relying on your professional expertise to provide them with an accurate and unbiased assessment of the property they are interested in. While other parties may also refer to your report, they should not be considered the primary audience.
It is also important to note that as an appraiser, you are bound by strict rules of confidentiality. You must only share information related to the assignment with your client and cannot disclose any details to other parties without their consent. This is to protect the privacy and interests of everyone involved, including the property owner and potential buyers. By following these guidelines, you can help ensure that the appraisal process is fair, accurate, and transparent for all parties.
Confusing Communication
Fannie Mae’s Appraiser Independence Requirements (AIR) advises appraisers to limit their interactions with various parties in a transaction, which has led to some confusion. The listing broker can provide accurate and detailed information on the subject property through the local MLS, which is beneficial to the appraiser and potential buyers during their search. Brokers can also contact appraisers and provide additional property information or additional comps, but cannot intimidate or bribe them - which was a problem in the not so distant past - but since the broker isn’t the appraiser’s client, the appraiser cannot discuss the end report or findings with them.
This is designed to protect the integrity of the appraisal process and ensure that appraisals are conducted objectively and without any undue influence. The appraiser must be allowed to form their own independent opinion of the value of the property based on their own research and analysis. Any attempt to influence the appraiser's opinion or to pressure them into a certain valuation is considered unethical and could result in legal consequences due to the Dodd-Frank Act. Ultimately, the goal of Dodd-Frank is to promote transparency and fairness in real estate transactions, and to protect consumers from fraudulent or inflated appraisals. By adhering to these guidelines, real estate professionals can help to ensure that the appraisal process remains unbiased and accurate, and that buyers and sellers alike can have confidence in the value of their property.
The confidentiality of appraisal results is an important aspect of the appraisal profession. Appraisers must protect the privacy of their clients and the information they provide. Disclosure of appraisal results to unauthorized parties can result in serious consequence, so it is essential for appraisers to be diligent in safeguarding confidential information as well as to stay informed about any changes to regulations or laws that may impact confidentiality requirements.
Still confused? Our Appraiser Experts are here to help! Or maybe you’re an appraisal expert too and are looking for a company built by appraisers for appraisers? We can help with that search too - just mosey on over to our Current Job Openings found under the “For Appraisers” tab.
