Conflict Of Interest

[MARKETVALUE]

Wanted some input with possible previous experience/USPAP specs on the following.

I have several subs who have family members (most often spouses) in the mortgage biz. Of course they would like to do their appraisal work. Obviously there is an inherent conflict if the family member is the Lo, but what about if they are a processessor?

How about if its a large comopany (say BOA for example) and the spouse is a manager of a mortgage branch, can the sub do an appraisal for another branch?

Just fishin' for some answers....

Thanks in advance!

MRM

 

[AC King]

Appraising a property for a relative or a close acquaintance may or may not be a conflict of interest; however, it may give the appearance of a conflict of interest. That appearace is best avoided whenever possible.

 

[Ray Ohler]

Ditto to AC King's response. It may not be a conflict, HOWEVER, it could be used, if uncovered in a discovery, to give that appearance.

 

[Joe Birrell (NY)]

My office policy is: If It can be construed to be a conflict avoid it.
We follow this like the 11th Commandment. This avoids ever having to explain to anybody why something might or might not be a conflict of interest.

 

[Tom Hildebrandt]

Joe and others

The correct answer is "it depends" The question can only be answered correctly (by USPAP) if you know the client and use of the appraisal.

The core portion of USPAP does not prevent an appraiser from appraising a property in which he has an interest, just that he/she must act with impartiality, objectivity independence and without accomodation of personal interests. If you can do your work in accordance with those items, you can appraise a property for even an immediate family member. However, the certification provided in Standards2, 3 and 5 requires you to disclose any present or prospective interest in the property that is the subject or any personal interest with respect to the parties involved. See line 1063 for the Std 2 certification as reference.

However, if your work product is requested for lending purposes, the suppplemental guidelines generally prohibits such behavior. For example, Statement 10 which deals with federally regulated transactions (line 3849-3858) says " Accepting an assignment involving parties or property in which the appraiser has a current or prospective interest that causes bias vilates the EtHICS RULE." This goes on to say that failure to disclose any relationship is a violation of the certification requirements. Further, Statement 10 goes on (lines 3854-3858) and says that to "accept an assignment involving a property or transaction in which the appraiser has a direct or indirect interest, financial or otherwise" is a violation of the agencies supplemental guidelines which is a violation of USPAP.

If you read the standard certification provided on most form reports, the verbage states that you have no such interest. So, if you accept an assignment from a client (typically lenders) who requires these certifications to be unchanged, and you complete the form, you would be in violation of the agencies guidelines.

So the answer is "it depends. " USPAP allows you to have an interest, but you still have the obligation to act ethically and to disclose the interest. If you do the work for most lenders, it is a violation.

The short answer is it is easier to avoid any sort of these ethical issues by avoiding any such situations where there is any appearance of a conflict.

Regards

Tom Hildebrandt GAA

 

[Blue1]

Marketvalue,

In this day and age, a trial lawyer can make whatever they want to make out of a situation. If you do an appraisal for a relative, any lawyer can construe it as a biased report. Just try explaining the nuiances of USPAP to a judge or jury. I'd stay away from any assignment for a relative, friend or even acquaintance.

 

[Anonymous]

Tom got it right. UPAP does not forbid it, it simply requires the disclosure of it. As far as lawyers go, if you are otherwise acting ethically, not running numbers and produce a credible appraisal, why should you be concerned about lawyers? If I am producing misleading or infalted reports, then I could see where I wouldnt want to confront a lawyer in a court room, but I dont do that kind of work.

 

[MARKETVALUE]

Thanks to all, Just wasnt sure how the 'letter' of the law ran. I'm not considered about the actual paper being put out, but was more so tabout he ramifications of the relationship. As most of you mentioned, full disclosure takes care of that, or at least should provide some false sense of security........accurate post above, a lawyer will constrew anything the way he/she needs for it to support their cause.

thanks again.

MRM