Pressure to Hit a Predetermined Value
You are completing an appraisal of a 480-acre irrigated farm for a lending client. The loan officer emails you: 'The borrower needs this to appraise at $3.6 million to close. My last appraiser always got us there. Please make sure the value supports the loan.' Your comparables analysis, reconciled through the sales comparison approach and supported by an income approach, indicates a value of $3.15 million ($6,563/acre). The loan officer's figure implies $7,500/acre, which is above every adjusted comparable in your file. The client is a long-standing relationship and represents significant future volume. The report is due in three days.
1. What are the ethical and standards obligations here, and what should you do?
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This is a textbook client-pressure / predetermined-value situation. Obligations:
- Independence and objectivity: USPAP's Ethics Rule prohibits appraising with a predetermined value or advocating a value to encourage a loan. The loan officer's request is a direct attempt to influence the result.
- Competency and support: The value must be supported by market evidence. $7,500/acre exceeds every adjusted comparable; there is no market basis for it. Reporting it would be misleading.
- Confidentiality vs. disclosure: You may not disclose the borrower's confidential info, but you must not misrepresent.
- Client relationship: Volume and relationship do not override integrity. Accepting the assignment conditioned on a value is prohibited.
Action: Politely but firmly decline to target a value. Respond in writing: 'My value conclusion must be based on market evidence; I cannot commit to a predetermined result. I will deliver an independent, well-supported appraisal.' Document the exchange. If the client insists, consider withdrawing from the assignment and, where required, notifying the appropriate body. Deliver the $3.15M conclusion with full support.
2. The loan officer replies that if you don't hit $3.6M, they'll 'find someone who will.' How do you handle this, and what documentation matters?
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- Do not capitulate. The threat confirms the pressure is about outcome, not analysis. Your obligation is to the integrity of the report, not to the loan closing.
- Document everything: Save the emails, note dates/times, and keep a contemporaneous record. This protects you if the loan later sours and questions arise about the appraisal.
- Respond professionally in writing: Restate that you will complete an independent appraisal; if the client prefers another appraiser, that is their choice, but you cannot produce a value unsupported by the market.
- Consider withdrawal: If the pressure continues or the client conditions engagement on a value, withdraw and return any unearned fee. Withdrawal is preferable to producing a misleading report.
- Know the exposure: A lender that shops for a value may be engaging in unsafe lending practices; your report may be reviewed by regulators or in litigation. A defensible, well-documented $3.15M is your protection - and the profession's.
- Optional reporting: Depending on jurisdiction and engagement, consider whether the conduct must be reported to a state board or the client's regulator. At minimum, consult your professional standards advisor.
The exam tests whether you recognize that 'everyone does it' and relationship pressure do not change the answer: the value is what the market supports.