Do I have an "Ethical Obligation"?

[Andee]

I have a property that I inspected and eventually the owner met me there, after someone else provided access. This is over 9,000 sf, over 1.5 acres, pool, tennis court, separate indoor half basketball court, grill, outdoor fireplace, and a fire pit, and being leased. When I asked about the current rents, he didn't remember and had to back to the office and check, eventually he got back to me and said it was $30,000 monthly, but while he was there he told me his brother is leasing the property.

Well, after doing some research I found the property was under the name of their company, in March 2025 it was transferred out of the company and to the brother that is leasing it, and in April 2025 it was transferred to the brother that is the current owner of title. After some more digging I found out that the company filed bankruptcy and the property was up for some type of auction sometime in June 2025, and with some more research, found that the current owner was in the same boat on his residence.

Basically, the brothers owned the company together, it went under while the company held both of their personal residence. They transferred from the company to their own name, then transferred each property again to the other, so they are now technically leasing their own residences from their sibling. Is there any ethical obligation I have to report the shadiness of all this, or just report all the transfers for my property that I'm working on? Oh, and lets not mention the fact that I have absolutely no rental properties in that price point.

 

[alebrewer]

This type of scenario is exactly why those reporting requirements exist.

 

[J Grant]

I have a property that I inspected and eventually the owner met me there, after someone else provided access. This is over 9,000 sf, over 1.5 acres, pool, tennis court, separate indoor half basketball court, grill, outdoor fireplace, and a fire pit, and being leased. When I asked about the current rents, he didn't remember and had to back to the office and check, eventually he got back to me and said it was $30,000 monthly, but while he was there he told me his brother is leasing the property.

Well, after doing some research I found the property was under the name of their company, in March 2025 it was transferred out of the company and to the brother that is leasing it, and in April 2025 it was transferred to the brother that is the current owner of title. After some more digging I found out that the company filed bankruptcy and the property was up for some type of auction sometime in June 2025, and with some more research, found that the current owner was in the same boat on his residence.

Basically, the brothers owned the company together, it went under while the company held both of their personal residence. They transferred from the company to their own name, then transferred each property again to the other, so they are now technically leasing their own residences from their sibling. Is there any ethical obligation I have to report the shadiness of all this, or just report all the transfers for my property that I'm working on? Oh, and lets not mention the fact that I have absolutely no rental properties in that price point.

Disclose what you know about ownership, and any past year listings, such as an auction listing. I don't see that it is the appraiser's responsibility to disclose financials about the owners, such as they filed for bankruptcy. The lender is supposed to do credit checks and vet their borrowers - that is not in our wheelhouse.

If all the market rents are below their figure of 30k, so be it. That is why we use market rents and not contract rents ( which can be invented or atypical )

 

[George Hatch]

If the transaction isn't arm's length or wasn't exposed in the listing services then just saying so will clue the reader into the need to follow up.


The reason we do rental surveys is to figure out the market rent.

"The comparable rental data (does/does not) align with the contract rents."

 

[J Grant]

Even when I suspect the rents the owner or agent gives me is BS, I do not say that to them. I just say, thanks for the information. Poker Face.

Then on the appraisal, the owner's inflated rent amount is 30k a month. Then I report three market rents closed leases of similar properties at 15k a month or whatever they are. And comment that those lease rates seem typical for the market. On the line in the appraisal where it is our opinion or estimate of market rent, I enter $15,000 a month.

No need to go on about it. The lender and users see it for themselves in the appraisal report.

 

[Andee]

Even when I suspect the rents the owner or agent gives me is BS, I do not say that to them. I just say, thanks for the information. Poker Face.

Then on the appraisal, the owner's inflated rent amount is 30k a month. Then I report three market rents closed leases of similar properties at 15k a month or whatever they are. And comment that those lease rates seem typical for the market. On the line in the appraisal where it is our opinion or estimate of market rent, I enter $15,000 a month.

No need to go on about it. The lender and users see it for themselves in the appraisal report.

When I was talking with him face to face, he though the rents were $20K, then I got the message they were $30K. I only have 1 rental comp that is close to the dwelling size, all others are around the 5,500 sf mark. This is the land of big homes, but most are owner occupied. You will get the occasional dwelling that is similar to what I'm dealing with that's rented but very rare. I have also seen properties that do that same thing, the owner reports to me what they want (unless I can talk with the tenant) and the market rents are lower. The lender is just going to beat me up on this report...I can see it already...no matter how much CYA I put in this report.

 

[Terrel L. Shields]

Disclose what you know about ownership, and any past year listings, such as an auction listing. I don't see that it is the appraiser's responsibility to disclose financials about the owners

Agree, state the FACTS and dispense with making assumptions about the property ownership circumstances. If you can find a listing for the auction, I would report that but again, I would not be making any assumptions about why it is up for sale. Report the income as the owner stated and say you have no evidence to support such rents.

I had a property once with a "contract" for sale that was badly inflated and the owner claimed the rents were $1,800 a month. But when I got there the renter said he was paying $600 a month...yep, pre-foreclosure.

 

[J Grant]

When I was talking with him face to face, he though the rents were $20K, then I got the message they were $30K. I only have 1 rental comp that is close to the dwelling size, all others are around the 5,500 sf mark. This is the land of big homes, but most are owner occupied. You will get the occasional dwelling that is similar to what I'm dealing with that's rented but very rare. I have also seen properties that do that same thing, the owner reports to me what they want (unless I can talk with the tenant) and the market rents are lower. The lender is just going to beat me up on this report...I can see it already...no matter how much CYA I put in this report.

IDK what kind of client "beats you up" on a report when you have support for your conclusions .

 

[Andee]

IDK what kind of client "beats you up" on a report when you have support for your conclusions .

The kind of lender that doesn't get all the boxes checked in favor of the loan going through. I have written reports where I covered everything I could possibly think of to not have a revision, yet I get some underwriter or reviewer that comes back and asks some obscure question that NO Appraiser could possibly answer, yet I have to come up with some type of an answer.

My favorite example of this "Please explain why the contract price is much lower than your final opinion of value and the adjusted values of all the comparable sales?" I don't know, because that's what they agreed on, to find out that the Lender didn't provide all the information, that this was a transfer between sisters....hhmmmm, may have something to do with the price. But they came back to ask me that question before I had all the pieces of the puzzle, which at the time I had no reason to suspect that it was a transfer between family members, it wasn't like they had the same last name.

 

[J Grant]

The kind of lender that doesn't get all the boxes checked in favor of the loan going through. I have written reports where I covered everything I could possibly think of to not have a revision, yet I get some underwriter or reviewer that comes back and asks some obscure question that NO Appraiser could possibly answer, yet I have to come up with some type of an answer.

My favorite example of this "Please explain why the contract price is much lower than your final opinion of value and the adjusted values of all the comparable sales?" I don't know, because that's what they agreed on, to find out that the Lender didn't provide all the information, that this was a transfer between sisters....hhmmmm, may have something to do with the price. But they came back to ask me that question before I had all the pieces of the puzzle, which at the time I had no reason to suspect that it was a transfer between family members, it wasn't like they had the same last name.

If the opinion of market value is lower than the SC price, I pro actively comment in teh appraisal to avoid being asked - even though technically it is not a USPAP obligation. It is more about client service.

If the SC price is higher than a MV appraisal opinion and there is a facto that it is not an arms-length sale, state it. Sometimes, there is no real reason except that their price is their price. In those cases I state that a SC price is negotiated between parties and the market value opinion was based on the most comps as adjusted. (or whatever comments apply )