Paying Referral Fees

[bvappraisal]

Can appraisers pay someone a referral fee for sending them an appraisal? Is there any criteria to do this or not to do this?

 

[George Hatch]

Management section of the Ethics Rule:

The payment of undisclosed fees, commissions, or things of value in connection with the procurement of an assginment is unethical.

Comment: Disclosure of fees, commissions, or things of value connected to the procurements of an assignment must appear in hte certification and in any transmittal letter in which conclusions are stated. In groups or organizations engaged in appraisal practice, intra company payments to employees for business development are not considered unethical. Competency, rather than financial incentives, show be the primary basis for awarding an assignment.

There is also an FAQ on the subject (FAQ #29, pg F-14 in 2008-2009 USPAP):

Question: It has come to my attention tyhat a local appraiser is paying a home inspection firm a $25.00 referral fee for each appraisal assignment the home inspector refers to the appraiser. Is it unethical to accept such an assignment if the appraiser has paid a fee for the assignment?

Answer: No, but accepting a fee requires specific disclosures. The Management section of the ETHICS RULE states:

The payment of undisclosed fees, commissions, or things of value in connection with the procurement of an assginment is unethical.

The Comment to the Management section goes on to say:

Disclosure of fees, commissions, or things of value connected to the procurements of an assignment must appear in hte certification and in any transmittal letter in which conclusions are stated.

Therefore, payment of the referral fee to the home inspection company is acceptable as long as this relationship is disclosed in the appraisal certification and any transmittal letter where conclusions are stated.

 

[Mztk1]

Yes but it must be disclosed in the report to whom payment was made and how much.

 

[Marcia Langley]

bv,

From your screen name, I assume you are an appraiser. The USPAP says if you have a personal interest in the outcome you must say so in your report.

Being biased is prohibited and the appearance of being biased could get you in trouble.

If you pay a finder's fee to your client or to anyone who has an interest in the transaction (agent, LO, buyer, seller, borrower or their companies or relations) you may have a conflict of interest.

The first test is can you be unbiased, the second test is are you confident that stating the relationship in your report will not cause you to appear biased?

 

[Mike Garrett RAA]

Marcia...I think you are mixed apples with oranges. Paying to procure as appraisal assignment is not unethical...so long as it is disclosed. The question that typically comes up in USPAP classes is..."what and how much is considered to be a fee"?

I would be more than willing to "pay" for assignments under certain conditions, especially in this market. If someone offers to give me, say, 25 full fee appraisal assignments every month, I would be more than willing to enter into a financial agreement. That does not bias me, it is merely a business decision on what I am willing to accept to do the work.

What is the difference between doing that or working for an AMC that keeps part of the fee? The key is ... disclosure!