Conflict Of Interest?

[CANative]

I've been asked to appraise a new (MH) home for a purchase. There is to be no lender as the buyers are paying all cash. But they told their buyer's agent that they want an appraisal to make sure they're paying an appropriate price.

The buyer's agent is not from the area so they asked the listing agent to arrange for the appraisal. The listing agent is from a realty company that that my family has worked with for decades. I respect them very much and apparently they respect me as I get a lot of referrals from them even though I've killed a few deals. They're honest and I'm honest.

So, number one, I'm trying to determine to to name as my client. The listing agent who is the only contact I'm likely to have and who I am billing for my services and who engaged me. Or should I name the buyer's of the property?

Also, I'm wondering if there could be a perceived conflict of interest by someone in this transaction because the listing agent hired me and he would obviously have a vested interest in the outcome. He was kind of concerned too and has never had this come up before. I told him I would pose the question to a professional forum I belong to.

 

[Anthem]

Wouldn't it be best if you just consider it a referral and then contact the buyers agent or the buyer and list them as the client. It sounds like they will be the intended user.

 

[Annemieke Roell]

Greg,

Since the buyers told their agent they want an appraisal done, how about you get the written order directly from the prospective buyers and thereby make them your client?

We do pre-listing appraisals for sellers quite frequently. THEY are the intended users and they hired us so they are our clients.

 

[Mr. Lisle]

The client will always be biased, you can't be. Every L.O. that orders an appraisal earns a commission, sale as the realtors. The problem would be if you feel that you know them too closely. If it is just a business relationship it is not a problem.

 

[Timothy Wixted]

Greg-

I think that an engagement letter identifying the buyers as your client is your best bet.

The fact that the listing agent contacted you could be considered more as a favor for the buyers and their agent rather than an attempt to engage you directly.

In any event, it's not for a mortgage finance transaction nor an FRT.


Tim

Edit- And the fact that you have killed deals for the listing agent would be strong evidence that there is no conflict of interest.

 

[Mike Garrett RAA]

The buyer is your client, get a check from them for the appraisal. If you would feel better, get an engagement letter but it really isn't necessary. I see no conflict of interest. My fishing partner (a real estate broker) refers clients to me all the time...I don't consider it a conflict.

 

[Richard Carlsen]

No conflict of interest. I get this kind of referral every once in a while, especially on an all cash transaction where the buyer is from out of town.

Regardless of who gives you the check, name the buyer as your client. Supplying them with an opinion of value to make a buying decision is the Intended Use of the report and they, the buyers, are the Intended User (remember those phrases from other discussions?)

Once you state what the Intended Use and who the Intended Users are, it is easy to determine for whom and for what you are writing the report. Read your certs carefully and see if you can honestly agree with the statements. If you do not see a conflict, then one most likely does not exist.

 

[Jo Ann Meyer Stratton]

In my opinion not only should the buyer be your client, I would also make it very clear to the listing agent, buyer's agent and the buyer that since the buyer is my client the appraisal will only be provided to the buyer and cannot be discussed in any shape or form with either the listing agent or the buyer's agent. I would also recommend there be clear statements all through the report that it is for the buyer's use only. And this would be a case where the March 2005 version would not be applicable! Use the 1993 version or maybe even a 2055 interior with lots of disclaimers and narrative--so that the report can't suddenly end up as part of a loan package!

 

[The Warrior Monk]

This is one of those cases where the appraisal is not an FRT.

 

[xm72mhd]

Hey regarding conflict of interest. This sounds like a straight forward business transaction where no favors are being expected due to relationships or special interests. In this business those who appreciate your work are your customers, your enemies go elsewhere.