Out-of-State Retrospective Litigation Assignment
An appraiser licensed in State A receives a litigation assignment from an attorney for a property in State B, 300 miles away. The effective date is 24 months in the past, and the attorney needs the report in 12 days for a mediation. State B allows temporary practice by out-of-state appraisers if they register and comply with State B standards, but registration takes 10 business days. The appraiser has never appraised in State B and has no local sales data. The attorney asks the appraiser to (1) omit an extraordinary assumption about a pending zoning variance because it confuses the judge, (2) make the fee $5,000 plus a $10,000 bonus if the value conclusion supports the attorney's client, and (3) label the assignment a value estimate rather than an appraisal to avoid unnecessary regulation. The appraiser completed two appraisals in the subject property type five years ago.
1. Identify the standards and ethics issues and decide whether the appraiser can accept the assignment as proposed.
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The appraiser cannot accept the assignment as proposed. The fee bonus is contingent on the value conclusion supporting one party, which is prohibited by the ethics provisions of USPAP-type standards; compensation cannot be contingent on the amount or direction of value, a subsequent event, or testimony. Labeling the work a value estimate does not avoid appraisal standards if the assignment is an appraisal. Omitting the pending zoning variance would mislead the reader; if the variance is uncertain, it must be disclosed as an extraordinary assumption or the value must be conditioned accordingly.
The appraiser also faces competency and jurisdictional issues. Temporary practice in State B requires registration, and 10 business days may be tight but not impossible. The appraiser has no local data and limited recent experience in the property type, so the competency rule requires either gaining competency before acceptance or disclosing the lack of competency and taking steps to complete competently. A 24-month retrospective effective date is not itself improper, but the appraiser needs sufficient historical data and must disclose the retrospective nature of the assignment. The appraiser should decline the contingency and the omission, register if possible, arrange local data and expertise, and document the scope of work.
2. If the appraiser accepts after correcting the engagement terms, what key disclosures and communication should be made to the attorney?
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The engagement letter and report should state that the assignment is an appraisal, identify the intended use for mediation and the intended user, and state the retrospective effective date. The appraiser should disclose the scope of work, including data sources and any local appraiser or data service used to gain competency. Registration in State B should be completed or the assignment declined.
The report should include the extraordinary assumption about the pending zoning variance, explain its effect if the variance is not granted, and state that the value could change materially. Any hypothetical condition must be clearly labeled. The appraiser should confirm in writing that the fee is not contingent on the value conclusion, testimony, or outcome, and that the appraiser will remain independent. The report should also satisfy recordkeeping and reporting requirements, including sufficient support for the retrospective value and a statement of assumptions and limiting conditions that does not conflict with the disclosures.