Dave makes some excellent points on how USPAP distinguishes appraisals and non appraisal activity such as auctions, dealers, and estate sales operations. In addition to my comments yesterday on being an appraiser and dealer, I am pleased to see that I already follow many of his suggestions of keeping the two businesses entities separate. I run my antique gallery as Washington Square Antiques and my appraisal practice as WSA Appraisals. Each has its own web site and address, business cards and identity.
In order to avoid potential conflicts of interest I would recommend all appraisers who also have other, related businesses to perform a review to ensure there is an adequate, acceptable, and distinguishable separation between the entities.
Dave Maloney stated in his comments to the AW Blog:
Todd,
You make some excellent points regarding the efforts you go through to ensure the client understands the role in which you are performing, i.e., as either a dealer or as an appraiser.
Allow me to put this issue in terms of USPAP.
We must begin with USPAP's definition of the term "Appraiser":
APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.
Comment: Such an expectation occurs when individuals, either by choice or by requirement placed upon them, or upon the service they provide by law, regulation, or agreement with the client or intended users, represent that they comply.
The operative words are “expected” and “represent.” When the client expects the individual to perform as an appraiser (i.e., independently, impartially and objectively) because of representations made by the individual that they will so perform, then the individual is obligated to comply with USPAP whenever developing and reporting (orally or in writing) an opinion of value. Included, of course, is the USPAP requirements prohibiting undisclosed interest in the subject property.
To not comply with USPAP while expected to act as an appraiser would constitute a misrepresentation and would be a violation of public trust.
Regarding one who is a known appraiser who is also a dealer, the ETHICS RULE of USPAP states:
An appraiser must not misrepresent his or her role when providing valuation services that are outside appraisal practice.
What does this mean? Individuals known by the public to be appraisers (perhaps as a result of the individual’s self-promotions, or by membership in an appraisal society, or by his or her Web site, etc.) often perform services in other roles outside of appraisal practice. Those other roles might include also being a dealer, auctioneer, estate liquidator, etc.
When one known to be an appraiser performs in a role outside of appraisal practice such as when performing as a dealer, he or she must not misrepresent that they are performing as an appraiser because they are not. They are performing as a dealer. So, the individual must clearly communicate with the client so that the client is aware of exactly in which role the individual is performing. Once done, the dealer can proceed to make offers to buy since he is performing as a dealer and not as an appraiser. Remember, USPAP applies only to appraisers who are performing appraisal practice.
Why is this separation of roles important? Because if performing as an appraiser, USPAP prohibits certain actions which are typically acceptable practice if performing as a non-appraiser. For instance, if performing as an appraiser, USPAP prohibits an undisclosed interest in the subject property, contingency fees or commissions, bias or advocacy. If performing as an appraiser, there is also a requirement for appraiser-client confidentiality that must be respected. None of these factors apply if performing as a dealer or in some other non-appraiser role. In order to maintain public trust in the appraisal profession, it is essential that the client is made aware of exactly which role it is in which one is performing.
When performing services outside the role of an appraiser such as when an appraiser is performing as an estate liquidator, dealer or auctioneer, the sole USPAP obligation is that the appraiser not misrepresent his or her role.
Such dual-role appraisers should be careful to separate these conflicting roles in their self-promotions so that clients do not become confused regarding which role the appraiser is performing. Separate Yellow Pages ads, business cards and Web sites for each of the appraiser’s professions will help to eliminate this confusion.
-Dave Maloney
www.AppraisalCourseAssociates.com
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