Appraisal News For Real Estate Professionals

2006/03/23

Appraisal Fee - Markup or Kickback? Part 2

Appraiser Question: "I received an order from an Appraisal Management Company (AMC) that requested I bill the client $75 more than my standard fee and return $75 to them. I've never heard of this before, but I haven't worked with many management companies. Is this common?" "Do I need to make a statement in the appraisal report that I have paid $75 to the AMC?" "Are there any other USPAP or legal concerns that I should consider to cover myself?" See Part 1 Response: My first thought when I read this question was that we may be concerned with a possible RESPA violation. Then I thought "Hey! There are some regulations a lot closer to home to be concerned with - USPAP! The Uniform Standards of Professional Appraisal Practice (USPAP) are the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services. I believe that the Ethics section of USPAP can provide some guidance to this question: Management (ETHICS RULE)
The payment of undisclosed fees, commissions, or things of value in connection with the procurement of an assignment is unethical. Comment: 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. In groups or organizations engaged in appraisal practice, intra-company payments to employees for business development are not considered to be unethical. Competency, rather than financial incentives, should be the primary basis for awarding an assignment.
So from the "Appraiser's" viewpoint, the issue is one of disclosure. Regardless of how appraisers may feel about the practice of collecting "administrative fees" for their client, it seems clear that they must disclose those fees on every page of their report in which "conclusions are stated" to comply with USPAP. Then the question becomes: Is there ALSO the possibility that a RESPA violation has occurred? Comments?

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