Do I have an "Ethical Obligation"?

[Tom D]

Pretty much agree with everybody. If you show the history of the facts, but not you opinion of their actions, yous should be safe. Don't want to part of some supposed cover up with dat family.

 

[George Hatch]

Whatever you do, don't get into speculating about the reasons why. Just disclose the objective facts to the best of your ability. It doesn't matter why the contract rents are so much higher than the rental survey would otherwise indicate. If you get to speculating "why" then you will end up being factually incorrect at least some of the time. Your opposition will certainly claim that speculation is wrong and then you're rolling around in the mud over what amounts to a tangent to the primary conclusion that:
this /= that.

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I never really thought about it in these terms before, but upon discussion it might be intellectually inconsistent with "observe/report" to SR2 characterize the apparent SR1 disconnect between subject and comps in terms such as

"the results of the rental survey do not support the contract rents"​

"the results of the sales comparison do not support the contract price" ​

I've been sometimes using this phrasing since always, but maybe that's the wrong way to characterize it. Maybe doing it this way might be leading to some pushback as to the "why" (which is irrelevant to my opinion of MV or MR) as opposed to the "what" of that MV or MR.

Technically, its the comparables which establish the measure of the value or rent conclusions, not the subject's reported rents or sale price. We're comparing the attributes of the comps to the subject and then adjusting for any difference to those comps. But it is the adjusted results of those comps which indicate to the MV. We are not using the contract price or contract rents to indicate to the MV.

The other way I've been characterizing it (when there is a sales contract or a tenant occupancy) looks like this:

"During the course of my analysis I also considered the subject's contract price at $500k but that appears to be completely outweighed by the comparable sales. "​

​

I'm not sure, but perhaps I should rethink that one, too.

 

[TerryRohrer]

I generally say "contract rents are not representative of market rents" or "the contract price is not representative of subject market value."

 

[George Hatch]

The reported contract rent is higher than the results of the rental survey.

 

[J Grant]

The reported contract rent is higher than the results of the rental survey.

Agree. keep it simple. No speculation as to motivations.

 

[Zoe]

Whatever you do, don't get into speculating about the reasons why. Just disclose the objective facts to the best of your ability. It doesn't matter why the contract rents are so much higher than the rental survey would otherwise indicate. If you get to speculating "why" then you will end up being factually incorrect at least some of the time. Your opposition will certainly claim that speculation is wrong and then you're rolling around in the mud over what amounts to a tangent to the primary conclusion that:
this /= that.

------------------------------

I never really thought about it in these terms before, but upon discussion it might be intellectually inconsistent with "observe/report" to SR2 characterize the apparent SR1 disconnect between subject and comps in terms such as

"the results of the rental survey do not support the contract rents"​

"the results of the sales comparison do not support the contract price" ​

I've been sometimes using this phrasing since always, but maybe that's the wrong way to characterize it. Maybe doing it this way might be leading to some pushback as to the "why" (which is irrelevant to my opinion of MV or MR) as opposed to the "what" of that MV or MR.

Technically, its the comparables which establish the measure of the value or rent conclusions, not the subject's reported rents or sale price. We're comparing the attributes of the comps to the subject and then adjusting for any difference to those comps. But it is the adjusted results of those comps which indicate to the MV. We are not using the contract price or contract rents to indicate to the MV.

The other way I've been characterizing it (when there is a sales contract or a tenant occupancy) looks like this:

"During the course of my analysis I also considered the subject's contract price at $500k but that appears to be completely outweighed by the comparable sales. "​

​

I'm not sure, but perhaps I should rethink that one, too.

I agree with that. There would be nothing wrong with having conversation with the client about what you know and you don't know what is going on. That might be good time to say do you know about all I am going to disclose on this? Sometimes the client can give value information.

 

[Zoe]

you might ask for title opinions on the properties. Might not be a bad idea. your client will have that. Your client an their title opinon lawyer will likely know how this is going to unfold in the long run.

Clients where people owe them money like a bank get bankruptcy notices pretty quick in the process and will need lease agreements also.

 

[gregb]

A multi-family lender client once told an owner they wanted to audit his leases because of the wide gap between the rental survey and the reported lease amounts he was stating on the rent roll.

 

[Zoe]

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.

You have nothing to worrry about sharing anything people have told you with your client. Your client hires you for a reason. Always focus on the subject property ............real property rights. Remember who your client is when you are sharing information.

Chances are huge that your client already knows what you discovered in preliminary analysis.

 

[Zoe]

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.

I would not go with shadiness. The fact you have no rental properties indicates the subject is likely going to be sold to an owner occupant. Therefore, the income approach would not be necessary for credible assignment results.

In other words, the most likely buyer of the subject based on MV appraisal would be owner occupant. Sales comparison or cost approaches to value would be your best options to arrive at MV opinion of value. I am totally assuming on H&B use analysis. I have no idea if single family residential is H&B use for MV appraisal.