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Appraiser's Responsbility to Disclose

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Alan Gertner

Thread Starter
Member
Joined
Nov 1, 2002
Professional Status
Certified Residential Appraiser
State
Texas
What responsibility, if any, does an appraiser have to report possible building code violations to the appropriate governing agency?

A recent post stated a homeowner extended his house to cover the septic system tank. The septic system license to operate was issued based on compliance with the local and state codes. If the homeowner has since violated those codes, the county health dept may revoke the license and shutdown the system til it is brought into compliance. This same type of problem can exist with other building components such as electrical.

If the appraiser contacts the county health dept to ask their opinion, the county may become aware of the problem and shutdown the septic system until brought into compliance. The homeowner could then try to hold the appraiser liable for bringing this to the county’s attention.

My response would be to identify the issue, document it, discuss it with the client, include it in the appraisal report and recommend the appropriate agency be contacted to resolve the issue. I would not contact the county health dept. This response protects the client's confidentiality and covers the appraiser's butt.

Other Opinions?
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
You could make a good defense that you were just seeking advice from local authority on a particular situation as required.

However, if you take it upon yourself to turn something in, you had better be prepared, IMNSHO, to defend your actions as a normal extension of the appraisal process. That could get sticky.

My policy is that I do not hold myself out to be an expert on the local building codes and I am not qualified to make such determinations as to what is acceptable and what is not. Therefore, unless it is a matter of obvious danger or a major health issue, I would not report it.

In the case of the house built over the septic tank, it is simple to call for county certification of the sewage handling system. Don't recommend it. Require it if there is a question. The owner or the lender can then call them and make the arrangements to get it signed off. Calling these the county agencies in is not part of the appraisal process.
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
You could make a good defense that you were just seeking advice from local authority on a particular situation as required.

Absoluely true. You might have to request the information from city or county officials in order to determine the possible impact on value.

As usual, the rest of Richard's post is also good advice. I am not a policing agency; my mandate is to protect the client's interest. As long as you require the appropriate inspections or licenses and bring the issue to your clinent's attention you have done your job. IMHO.

Check this interesting article, which Pamela posted on a previous post:

http://www.rismedia.com/index.php/article/...eview/2350/1/1/

Although the article is directed at realtors, I think the same thing applies to appraisers. If you know about something and don't disclose it in your report you are just being dumb.
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Alan,

Richard has given you good advice.

I would appraise it with a requirement/condition that the owner obtain a letter from the county as to the acceptability of the septic system/tank. Explain in your report why you are calling for the letter so your client knows where you're coming from and why you are calling for the letter.

If it's illegal and the owner knows it, he won't get the letter from the county and the loan will not close because the condition has not been satisfied. You've done your job and stayed out of the building code enforcement business. And no one is mad at you for being a "rat." If the lender closes the loan without the letter, it's their problem. You're clear.

Plus, it's always best to have a letter in the file. You're not the expert, so throw it on an expert to solve your problem. The same idea goes for anything you see while completing an inspection that may be illegal, non-conforming, including zoning, etc. Call for a letter from the appropriate authority to keep you in the clear. Phone conversations with county/city employees are not recorded and what is said one day is not true the next. The letter is there forever.

I have a friend who is a builder. He just finished a $380,000 home in Washington Twp.,NJ. The township lost a court case with the state because the twp wanted fire sprinkler systems to be installed in all new residential construction. He knew the twp lost the case but never got a letter saying it was OK to build a new home without the fire sprinkler system figuring that was it-they lost the case. He built it. It went through all the twp building inspections. The fire inspector turned the home down on the final inspection because it didn't have the fire sprinkler system installed. He's like...What???? It went through all the inspections!!!

So it was to close on 10/30/02 and there it sits. He's paying for the buyers hotel costs, construction loan, has to engage a lawyer to fight the township to find out who said what to who-nothing is in writing and he now faces the possibility of holding the house until the the twp relents, going to court whenever that can be scheduled-months away- or trying to rip out walls and ceilings to retro fit a fire sprinkler system. He knew the twp and state were in a battle but didn't have the sense to get a letter saying it was OK to build without the fire sprinkler system so he would have hard evidence. See where I'm going with this?? Get the letter whenever anything looks funky. You'll sleep much better.

Ben
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
I think that this is where confidentiality applies. You report the possible violation as an observed condition of the property, then condition your report on there being no violation of code that would require remediation. If you feel that remediation is necessary, adjust in the report based on cost to cure plus any market reaction as necessary. However, you are not the eyes and ears of the government. While the property may not comply with code, the issue is between the lender (your client) and the borrower and stop at that.

Roger
 

Frank Bertrand

Junior Member
Joined
Aug 21, 2002
Professional Status
Certified General Appraiser
State
Pennsylvania
YES, "You are not the eyes and ears of the gov't" is soooo true, but as the eyes and ears and sometimes nose of the client, any abnormalities should be documented and let the client work on it. Had one where the distance between the septic drain field and well were less than minimum. Copied the page out of the municipal code and sent it in with the report and conditioned the appraisal. Other time just took pictures of mold, or extra green grass over the septic system and commented on it. But report someone? Not me, said the flea.
 
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