July 08, 2009
AMC Competence, Fee Issues Debated in Latest ASB Q&A
In its June Uniform Standards of Professional Appraisal Practice Q&A, the Appraisal Standards Board noted that when the appraiser is collecting a fee from the prospective borrower, on behalf of an appraisal management company, the appraiser must disclose the fee if the fee was part of the compensation to procure the assignment. It also addressed whether or not it is permissible for an appraiser to accept a valuation assignment from an AMC when the subject property is located outside the appraiser’s primary market.
Citing USPAP’s Management section – which states, “Disclosure of fees, commissions, or things of value connected to the procurement of an assignment must appear in the certification and in any transmittal letter in which conclusions are stated” – the ASB concluded that if an appraiser did not pay a fee to procure the assignment, then no disclosure is necessary. Simply collecting funds from one party on behalf of another party is not, in and of itself, representative of paying a fee for procurement of the assignment, they reasoned. The ASB noted, however, that if the specific facts of the appraisal engagement agreement with the client led the appraiser or others to believe a fee was paid for procurement of the assignment, disclosure that a fee was paid is required in the certification as well as any transmittal letter in which the appraiser’s conclusions are stated.
In another AMC-related question, the ASB said that if an appraiser believes he or she lacks the proper familiarity with the subject area, then that appraiser is not competent to complete the assignment. The appraiser therefore must either decline the assignment, or the client must be notified and the appraiser must take the necessary steps to become competent (and disclose such steps in the assignment report).
The ASB went on to note that the issue of geographic competency is also addressed by the Scope of Work Rule in USPAP, which states the following:
“For each appraisal, appraisal review, and appraisal consulting assignment, an appraiser must:
1. Identify the problem to be solved;
2. Determine and perform the scope of work necessary to develop credible assignment results; and
3. Disclose the scope of work in the report.”
The ASB noted that its USPAP Q&A may not represent the only possible solution to these issues, nor may the advice provided be applied equally to seemingly similar situations. The USPAP Q&A, available each month at www.appraisalfoundation.org, does not establish new standards or interpret existing standards and is not part of USPAP.