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Dear Shannon:  I’m a long time licensed appraiser and commercial real estate broker, and I routinely prepare appraisals on property for XYZ Lender. Earlier this year, XYZ Lender sent me out to appraise a 23-unit apartment building for their consideration to refinance for the Owner. The appraisal report contained all the necessary items including property address, date prepared, value, purposes, market data, etc. The Owner reached out to me later and said she didn’t realize how much the building had appreciated and decided to sell the building instead of refinancing it. Within one week, an offer was made on the property and accepted.

During the loan application process, the prospective buyer told the new lender that the property was recently appraised by XYZ Lender. The new lender was surprised to hear that I am both the listing broker and the appraiser and said no disclosure was made about my ‘contemplated interest’ as required in Standard of Practice (SOP) 11-1.  So, the new lender filed an ethics complaint against me.  Can the new lender do that? The new lender didn’t hire me to do an appraisal. In fact, I never interacted with the new lender at all. The new lender argues that as a licensed commercial broker, there always is the chance that I could have listed the property in the future so I should have disclosed my ‘contemplated’ interest. But I can tell you, honestly, that I did not have a contemplated interest in the property when I did the appraisal. I’m concerned about what SOP 11-1 says and wonder if somehow what I did was a violation of Article 11. Was I not qualified to list the property once I conducted the appraisal? Please help, I’m sincerely concerned.

Dear Sincerely Concerned:  Really glad you reached out on this one and frankly share your concern here because it sounds like you didn’t do anything wrong. Let’s take a look at Article 11, as it relates to your situation. Then we’ll look at the relevant parts of Standard of Practice (SOP) 11-1 and further guidance.

First, anyone can file an ethics complaint. Yes, that includes the new lender. Even though they didn’t hire you to do an appraisal, they can file a complaint. Even if they never interacted with you at all, it doesn’t matter, anyone can file a complaint. Unlike in a courtroom situation where ‘standing’ is required to file a complaint, for NAR’s Code of Ethics, ANYONE can file an ethics complaint, ‘standing’ is not required.

Now let’s look at Article 11 which states: The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate.

REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10)

Article 11 prohibits you from providing specialized professional services concerning a service outside your field of competence. XYZ Lender asked you to do an appraisal for a 23-unit apartment building.  One could argue appraisal of such property is a specialized professional service. However, it sounds like when you conducted the appraisal for XYZ Lender you did so within your field of

competence because you are not only a licensed appraiser, but also a commercial real estate broker. So far I’m not seeing where there is a possible violation here.

Let’s dig into SOP 11-1 which says:

When REALTORS® prepare opinions of real property value or price they must:

1. be knowledgeable about the type of property being valued,
2. have access to the information and resources necessary to formulate an accurate opinion, and
3. be familiar with the area where the subject property is located unless lack of any of these is disclosed to the party requesting the opinion in advance.

When an opinion of value or price is prepared other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, the opinion shall include the following unless the party requesting the opinion requires a specific type of report or different data set:

1. identification of the subject property
2. date prepared
3. defined value or price
4. limiting conditions, including statements of purpose(s) and intended user(s)
5. any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
6. basis for the opinion, including applicable market data
7. if the opinion is not an appraisal, a statement to that effect
8. disclosure of whether and when a physical inspection of the property’s exterior was conducted
9. disclosure of whether and when a physical inspection of the property’s interior was conducted
10. disclosure of whether the REALTOR® has any conflicts of interest (Amended 1/14)

There’s a lot to unpack here. When preparing your appraisal, SOP 11-1 requires you to be knowledgeable about the type of property, have access to info and resources to formulate an accurate opinion and be familiar with the area where the property is located. You said the Owner hired you to list the property because she liked how thorough you were with the appraisal process, how familiar you were with this location and type of property and that you are also a commercial real estate broker. Sounds like high praise and acknowledgement directly from the Owner of your competence in providing such specialized professional services. Again, I’m not seeing where there is a possible violation so far.

Another section of SOP 11-1 says when you prepared your appraisal, not in pursuit of a listing, your appraisal report must contain certain things including any present or contemplated interest, including the possibility of representing the seller. You said the new lender claims that as a licensed commercial real estate broker, there is always a chance that you could have listed the property in the future so you should have disclosed your ‘contemplated’ interest.  However, you were hired by XYZ Lender to conduct an appraisal on a 23-unit apartment building for their consideration of possibly refinancing the property for the Owner. Further, you are emphatic that you did not have a contemplated interest in the property when you did the appraisal and were just doing the appraisal.

You are concerned about what SOP 11-1 says and wonder if somehow what you did was a violation of Article 11.  Sounds like you provided all of the appropriate information in your appraisal, and at that time, you had no intention of listing this property.  It appears that you were qualified to list the property after you conducted the appraisal and were not in violation of Article 11. Hope this puts your mind at ease.

Inspired by Commercial Case Study #2 for Article 11

Shannon Allen is an attorney and Florida Realtors Director of Local Association Services

Note: Advice deemed accurate on date of publication

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