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Conflict Of Interest

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Tom4value

Senior Member
Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
My brother (a realtor) and I are looking into buying distressed properties, rehabbing and flipping. He noted that I do a lot of aquisition value appraisals and thinks that would be a good source for potential properties. I told him that would be a conflict of interest for me. He claims that it would only be a conflict if I had a prior interest in the property and it would not be if I decide after I do the appraisal. Can anyone help me point to him why I can’t or prove that I am wrong? Thanks.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
It sounds like a conflict to me.

Example#1: I do an appraisal for a property I have no interest in or a prospective interest going forward. I have no baggage. I appraise it and it is worth $X.
Later, my brother says, "Hey, know of any properties we can flip?" I say, "As a matter of fact, I do...." My brother makes an offer and we buy it.
No problem (but certainly I'm open to the accusation).

Example #2: I do an appraisal for a property I have no interest in but I'm on the look-out to purchase properties like the subject going forward. I have baggage. I appraise it and it is worth $X.
Later, my brother says, "Hey, know of any properties we can flip like we talked about?" I say, "As a matter of fact, I do...." My brother makes an offer and we buy it.
Problem.

upload_2018-2-25_12-23-57.png

If you are in the market for properties like the subject, and is a candidate for your investment, I'd say you have a prospective interest that is strong enough to conflict with the above.
To eliminate this conflict, the easy choice would be to never purchase any of the properties you appraise (when I say, "never", I don't mean for all eternity. Buying the property a few years after your appraisal would require some very special circumstances to be a conflict, IMNSHO).

Good luck!

EDIT TO ADD: You could, if the client agreed, disclosed in the certification that you do have a prospective interest in subject-like properties. That would be acceptable. Obviously, the presumption is, regardless of the prospective interest or if it is ever exercised, the appraisal process and you are acting independently, impartially, and objectively. :cool:
 
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NachoPerito

Senior Member
Joined
Jul 25, 2012
Professional Status
Certified General Appraiser
State
Washington
It doesn't have to be a conflict of interest, but you could have problems.

For example: you appraise a property for Mrs. Smith for $325k, then you later buy that property for $325k. Then the seller realizes they could have gotten more for the property when their neighbor sells for 20% more so they file a civil lawsuit against you and complain to the State Board.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
My brother (a realtor) and I are looking into buying distressed properties, rehabbing and flipping. He noted that I do a lot of aquisition value appraisals and thinks that would be a good source for potential properties. I told him that would be a conflict of interest for me. He claims that it would only be a conflict if I had a prior interest in the property and it would not be if I decide after I do the appraisal. Can anyone help me point to him why I can’t or prove that I am wrong? Thanks.

Who is your client for such an appraisal?

What is an "acquisition value appraisal"?

I'm not following--my bad!--exactly what it is that you are asking.
 

Tom4value

Senior Member
Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
It sounds like a conflict to me.

Example#1: I do an appraisal for a property I have no interest in or a prospective interest going forward. I have no baggage. I appraise it and it is worth $X.
Later, my brother says, "Hey, know of any properties we can flip?" I say, "As a matter of fact, I do...." My brother makes an offer and we buy it.
No problem (but certainly I'm open to the accusation).

Example #2: I do an appraisal for a property I have no interest in but I'm on the look-out to purchase properties like the subject going forward. I have baggage. I appraise it and it is worth $X.
Later, my brother says, "Hey, know of any properties we can flip like we talked about?" I say, "As a matter of fact, I do...." My brother makes an offer and we buy it.
Problem.

View attachment 34491

If you are in the market for properties like the subject, and is a candidate for your investment, I'd say you have a prospective interest that is strong enough to conflict with the above.
To eliminate this conflict, the easy choice would be to never purchase any of the properties you appraise (when I say, "never", I don't mean for all eternity. Buying the property a few years after your appraisal would require some very special circumstances to be a conflict, IMNSHO).

Good luck!
That sounds like a good enough argument for me. Thanks.
 

Tom4value

Senior Member
Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
It doesn't have to be a conflict of interest, but you could have problems.

For example: you appraise a property for Mrs. Smith for $325k, then you later buy that property for $325k. Then the seller realizes they could have gotten more for the property when their neighbor sells for 20% more so they file a civil lawsuit against you and complain to the State Board.
Even if I do find that I can technically do it and conform to USPAP, this sounds like an all too real scenario. Thanks.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I wouldn't do it...but that is just me. I know of an appraiser, now dead, that bought a lot of properties that he did the foreclosure appraisal on. Doesn't pass the smell test.
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Tom, you won't lose your license until you buy your first property. Then it will be a conflict.
 
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