Identification of Contributor to Appraisal
Article 11, Part 7
REALTOR® A, who had made a number of residential and farm appraisals for Client B, a bank, was asked to appraise the real property of a corporation that operated two extensive industrial parks. REALTOR® A made his appraisal of open land belonging to the corporation for future development. With respect to specialized industrial structures included in the assignment, he engaged the XYZ ﬁrm of industrial engineers to make a study of obsolescence and of current reproduction costs leading to conclusions. The report on this study was incorporated into REALTOR® A’s appraisal report to Client B, without identifying the XYZ ﬁrm as a contributor to the report.
Sometime after the submission of the report, Engineer C, a member of the XYZ ﬁrm, was invited to speak on an appraisal panel arranged by the local Board of REALTORS® . During his talk he used as an illustration some of the industrial properties that had ﬁgured in REALTOR® A’s appraisal report. Following the program, in informal conversation with Engineer C, REALTOR® B learned of REALTOR® A’s action in incorporating the engineering ﬁrm’s conclusions into his own appraisal without identification of the firm and its contributions to the assignment. REALTOR® B then filed a complaint against REALTOR® A alleging violation of Article 11 of the Code of Ethics. After examining the facts as set out above, the complaint was referred by the Grievance Committee for hearing before a panel of the Board’s Professional Standards Committee.
At the hearing, REALTOR® A took the position that he had not violated Article 11 because the essence of the appraisal assignment had been to exercise his judgment as an appraiser, and that he had not engaged any other person to exercise judgment in connection with the assignment. He had simply employed the XYZ engineering ﬁrm, he said, to make certain conclusions as to the extent of obsolescence in properties and as to the current cost of reproducing them. Conceding that he had incorporated the XYZ ﬁrm’s report into his own appraisal report, REALTOR® A contended that this material was only incidental, and that the essential appraisal function of arriving at a valuation was entirely his own work. He stated further that he had paid the XYZ ﬁrm for its services and felt that relieved him of any obligation to identify the ﬁrm in his appraisal report.
During the hearing it was established that REALTOR® A had no previous experience in appraisal of industrial property, and that he had not disclosed this to Client B at the time he accepted the assignment.
The Hearing Panel concluded that REALTOR® A’s defense was insufﬁcient; that the appraisal process includes the ﬁndings and calculations that support judgment; that the XYZ firm’s conclusions had constituted a major element of the appraisal report; that under the requirements of Article 11, REALTOR® A should have identiﬁed the ﬁrm and its contribution.
REALTOR® A was found in violation of Article 11.