Using Retainers

(by David Maloney) It is not an uncommon practice for appraisers to request a retainer in some assignments. If you do not know the client well or if the client does not have a good payment history, you should require a retainer. In addition, it is common to request a retainer when the assignment involves legal matters—particularly in cases involving battling parties.

An appraisal assignment retainer is a sum of money a client gives the appraiser as an advance for appraisal services that the appraiser has agreed to perform for the client. The retainer might also include advance payment for anticipated expenses associated with the appraisal assignment such as for the appraiser arranging for an authentication service or for retaining the services of expert appraisers to assist with the assignment.

Appraisers must keep accurate and detailed records of all funds deposited into and withdrawn from the client’s retainer account. Appraisers can bill against the retainer on a daily, weekly, or monthly basis. For example, if the client gave the appraiser a $2,000 retainer and the appraiser performed two hours of appraisal work on the client’s behalf during the preceding month (at a rate of $150 per hour), the appraiser would withdraw $300 from the retainer as earned income. That would leave a balance of $1,700 in the retainer account which is still considered to be unearned by the appraiser. In other words, it is still the client’s money, though it is being held in trust by the appraiser until earned.

At the conclusion of the appraisal assignment, any balance in the retainer account will be applied to the final invoice. The appraiser will return to the client any monies remaining in the client’s retainer account after all appraisal fees and expenses have been paid. On the other hand, if the client’s retainer account had been exhausted, the client will be obligated to pay the balance of appraisal fees/expenses remaining.

Sometimes clients believe that the money they pay to an appraiser as a retainer is a set total fee for all the appraisal services associated with the appraisal assignment. Unless the appraiser specifically tells the client that he or she is charging a flat fee for the appraisal services, a retainer is payable as an advance only. The actual cost of the appraisal services might be less (in which case money will be refunded to the client) — but it might also be more. For example, in the case of a complex appraisal assignment including hundreds of items, or in the case of litigation, which might require ongoing appraisal work, it isn’t always possible for the appraiser to accurately determine in advance what the cost of appraisal services will be. Unfortunately, there are too many variables in such assignments that can affect the final assignment cost. For that reason, appraisers may require that clients pay a retainer and may also ask them to replenish the retainer while the assignment continues if the retainer falls below a certain dollar amount.

Depending on the type and size of the assignment and my past experience with the client, I might request that a retainer be paid. Before beginning the assignment, I typically obtain a retainer equivalent to a day’s work along with the signed Contract for Appraisal Services and the client’s instructions to proceed. When the amount in the retainer begins to dwindle, I send an invoice for the next payment, and so on. As noted above, the final payment is due upon completion of the assignment. I send a refund if, at the end of the assignment, there is an excess in the retainer account.

(The above is an excerpt from the 5th edition of Dave Maloney’s award-winning book, Appraising Personal Property: Principles & Methodology (Appraisers Press 2011))