Tag: maloney

Walk-Throughs: Performing as an Appraiser vs. as an Estate Liquidator

Posted on by Dave Maloney

Walk-Throughs: Performing as an Appraiser vs. as an Estate Liquidator

(by Dave Maloney) Appraisers often conduct walk-throughs as a cost-effective way for the client to obtain the information he or she is seeking. These types of assignments often call upon the appraiser to develop opinions of value and report them orally, i.e., to perform an oral “appraisal.” At other times, these walk-throughs turn out to be not “appraisal” assignments being performed by an “appraiser”, but rather “pricing services” being provided by an “estate liquidator.”

Performing Walk-Throughs as an Estate Liquidator

Sometimes estate liquidators who are also appraisers are called upon to perform as appraisers. Sometimes they are not, such as when they are asked by the client to perform as estate liquidators instead. If they are appraisers belonging to certain appraisal societies, they must comply with USPAP if developing “opinions of value” for the estate sale client, but if, instead, they are performing a “pricing service” as an estate liquidator, then they are not so bound. Indeed, in the latter scenario USPAP does not even apply. USPAP applies only to appraisal practice services and not to offering “pricing services.”

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Fair Market Value

Posted on by Dave Maloney

Fair Market Value

(This is the 3rd of a 3-part article | Part 1 | Part 2)

(by David Maloney) Fair market value is often confused with market value. The stumbling block is normally in regards to the issue of title transfer. While a market value appraisal assumes the transfer of sold property to the new owner as of a specified date, fair market value assumes that the item is not sold, but rather that ownership is retained. Fair market value is used, as an example, by the IRS to substantiate tax deductions for noncash charitable contributions, or as a basis on which to levy estate taxes on property in the decedent’s estate that is bequeathed and not sold.

Fair market value is defined by a legal or regulatory jurisdiction and may vary with individual jurisdictions, i.e., from state to state. For the purposes of this book, we will make use of fair market value as defined by IRS Regulation §1.170A-1(c)(2) and as expanded on by the Treasury Regulation state §20.2031-1(b).

Definition of Fair Market Value

Treasury Regulation §1.170A-1(c)(2) defines FMV for noncash charitable contribution purposes as:

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Market Value

Posted on by Dave Maloney

Market Value

(This is the 2nd of a 3-part article | Part 1 | Part 3)

(by David Maloney) Market value is an all-encompassing general concept that is based on a market perspective (as opposed to a user’s perspective) and on what marketplace participants view as typical and normal market conditions.

The public’s expectation that a market value appraisal reflects only the perspective of the marketplace, and is not affected by such other criteria as an intended user’s objectives, is important. Meeting this expectation serves to foster and promote public trust in professional appraisal practice, a fundamental purpose of the Uniform Standards of Professional Appraisal Practice and one that applies to all work performed under USPAP. (USPAP AO-22)

Why is market value such an important type of value? Because it refers to a price that a seller can expect to receive from a buyer in an open and fair transaction. Knowing the market value of a property allows a would-be seller to determine an asking price. Without knowing the market value, the seller might price their property too high or too low, either of which could have negative financial results (possibly on the seller as well as on the buyer).

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Market Value vs. Fair Market Value: What’s the Difference?

Posted on by Dave Maloney

Market Value vs. Fair Market Value: What’s the Difference? 

(This is the 1st of a 3-part article | Part 2 | Part 3)

(by David Maloney) There seems to always have been confusion regarding the term “market value” and how it relates to “fair market value.” Given the inconsistent manner in which terms are used within the appraisal profession, it is not surprising that such confusion exists. There is “market value” itself, but there are also various “types” of market value such as “fair market value” and “orderly liquidation value.” But there are also types of value that are NOT market value types such as “replacement value” and “forced liquidation value.” 

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Proposed Qualification Criteria for Appraisers

Posted on by Dave Maloney

Will TAF’s Proposed Criteria for Personal Property Appraisers Have Teeth?

(By Dave Maloney Sep 1, 2012) The Appraiser Qualifications Board (AQB) of The Appraisal Foundation (TAF) recently released a proposed new version (click here to view) of its Qualifications Criteria for Personal Property Appraisers. A colleague recently posited that: “Even though the proposed standards are voluntary, those of us belonging to an association will be impacted by the acceptance of the standards by the association.”

My reply was that I felt that the issue is more complicated than that.

I was a member of the TAFAC “criteria” committee back in 1998 when we first adopted the minimum qualification criteria for the personal property appraiser. As of this writing (September, 2012) those current criteria (click here to view) are in force and will remain so until the new criteria are adopted which might be in two or more years.

Those 1998 criteria are clearly voluntary for all appraisers, regardless of their societal affiliation. They criteria states so, to wit: “The AQB envisions that the [1998] Personal Property Appraiser Minimum Qualification Criteria will be used by major clients of personal property appraisers such as corporations and government agencies. It is important to note that this document sets out minimum criteria with which personal property appraisers may voluntarily wish to comply. The AQB does not foresee any governmental body utilizing these guidelines as part of a regulatory program.”

A few years ago I queried all societies and was surprised to learn that no society at all had or now has an established system for maintaining a registry of their members who meet the 1998 criteria. What is more, the 1998 criteria requires a comprehensive exam. Again, no society offers a comprehensive exam required for members wishing to voluntarily qualify. In short, to my knowledge, no society has systems in place to facilitate their members complying with the existing (1998) criteria. It would seem that the 1998 criteria has failed completely in its stated goal as noted above.

But the optional compliance requirement, for some, is now going to change. The criteria now being proposed are no longer voluntary for all appraisers.

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Misuse of Terms “USPAP Certified Appraiser” and “USPAP Certified Appraisals” Threatens Public Trust

Posted on by Dave Maloney

Misuse of Terms “USPAP Certified Appraiser” and “USPAP Certified Appraisals” Threatens Public Trust

(by David Maloney) There appears to be a growing use by appraisers of two USPAP-related terms which might be construed as being misleading, thus this caution.

In the first instance, an appraiser refers to him or herself as being a “USPAP Certified Appraiser.” In the second case, the appraiser states that he or she offers “USPAP Certified Appraisals.”

According to John Brenan, Director of Research and Technical Issues at The Appraisal Foundation, “The Appraisal Foundation does not certify appraisals or appraisers.” This alone should give one pause for using the two questionable terms, but there are additional reasons as well.

The Ethics Rule of USPAP prohibits advertising in a “false, misleading or exaggerated manner.” Doing so, of course, endangers public trust in the appraisal profession — and recall that maintaining the public’s trust is the primary reason for the development of USPAP in the first place. In addition, during deposition or testimony the opposing attorney might take an appraiser to task for promoting him or herself as being a “USPAP Certified appraiser” or offering “USPAP Certified appraisals” when The Appraisal Foundation itself has stated that no such type of appraisers or appraisals exist.

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The Appraiser-Client Relationship and Confidentiality

Posted on by Dave Maloney

The Appraiser-Client Relationship and Confidentiality

(by David Maloney) There exists a special relationship  between the  appraiser and the client, and the appraiser is obligated to protect the confidential nature of that relationship. Specifically, the appraiser must  reveal neither the 1) results of an assignment nor 2) any confidential information other  than as permitted by the ETHICS RULE.

According to the  ETHICS RULE, confidential factual data obtained from the client and the results of an appraisal may be disclosed only to:

  • The client and anyone specifically authorized by the client, e.g., an insurance company, or, in the case of a divorce, to the client’s attorney,
  • Third parties authorized by due process of law, e.g., pretrial discovery, depositions, court testimony by the appraiser, or
  • A duly authorized appraisal society’s peer review committee

As noted, an appraiser must  respect the confidential nature of information obtained during the appraisal  process. USPAP defines confidential information as:

information that is either: identified by the client as confidential when  providing it to an appraiser and that is not available from any other source;  or classified as confidential or private by applicable law or regulation. (USPAP)

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Appraisal Procurement Fees vs. Finder’s Fees

Posted on by Dave Maloney

Appraisal Procurement Fees vs. Finder’s Fees

(by David Maloney) Appraisers often wonder if they are allowed to request a finder’s fee when referring an appraisal client to another appraiser, or a would-be consignor to an auction house. Or if appraisers can pay a fee to others in order to entice them to send appraisal business their way.

It is a confusing issue and the waters quickly become even more muddied when one takes into consideration that many appraisers perform in other roles, such as as dealers and auctioneers—roles which are not governed by USPAP and roles for which the awarding of finder’ fees is a common practice. USPAP sets forth requirements regarding fees or things of value being pro-actively paid by one performing as an appraiser in order to procure an appraisal assignment, but USPAP does not address accepting finder’s fees. (By the way, this is to be expected, since USPAP applies only to appraisers and not to individuals performing in non-appraiser roles such as dealers, estate liquidators, auctioneers, etc.)

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Using Retainers

Posted on by Dave Maloney

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.

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Is an Appraiser a Fiduciary?

Posted on by Dave Maloney

Is an Appraiser a Fiduciary? 

(by David Maloney) If deemed to be a fiduciary, appraisers could be held liable for breaching their fiduciary duties. But do appraisers normally perform in the role of a fiduciary? The answer is “No.” 

 Though professionals, appraisers typically act in an arm’s-length manner in the capacity of independent contractors but not as fiduciaries. 

A fiduciary is one who has a special relation of trust, confidence, or responsibility in his or her obligations to others, as does a bank trust officer, a guardian and his minor ward, the Executor of an estate, a company director, a lawyer and his client, or an agent of a principal (e.g., an estate liquidator or an auctioneer.) A fiduciary is expected to act as an advocate for his or her client who is normally in no position to supervise or control the actions taken by the fiduciary on his behalf. The client must take those actions on trust, and the fiduciary principle is designed to prevent that trust from being misplaced. Fiduciaries who violate that trust can be held liable for doing so. 

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