Competency and Client Pressure on a Mixed-Use 'Duplex'
You are a certified residential appraiser. A credit union orders an appraisal for a home-equity line on a property described in the order as a 'duplex' using the 1025 form. At inspection you find a two-story building: the ground floor is a vacant 1,100-square-foot former retail store with plate-glass windows and a separate entrance; the upper floor is a 900-square-foot two-bedroom apartment. Zoning is C-1 commercial, and the upper-floor residential use is legal nonconforming. The assessor classifies the parcel as commercial. The loan officer says, 'It is just two units-use the 1025 and keep it simple; we need $350,000 to make the line work, and we need it in 48 hours.' You have not appraised a mixed-use property in five years and have no recent commercial rent data. The property has active roof leaks and mold-like staining in the store ceiling.
1. What USPAP competency and scope-of-work issues must you resolve before accepting or continuing this assignment? State what you would do.
Read the worked answer
Apply the Competency Rule before accepting. The assignment is not a simple 1–4 unit residential appraisal: the ground-floor commercial space, C-1 zoning, commercial assessment, and lack of current commercial rent data mean you do not currently have the knowledge and experience to complete it competently. You must either decline, associate with a commercial appraiser who signs and takes responsibility for the commercial portion, or take other steps to acquire competency and disclose those steps in the report. The 48-hour deadline and the client's requested form do not define the scope of work. Under the Scope of Work Rule, the scope must be sufficient for credible results; a 1025 form is not adequate for a mixed-use property. The active roof leaks also require you to address deferred maintenance and any safety or occupancy issues. If you proceed, disclose the property type, scope, consultant role, and any extraordinary assumptions. An extraordinary assumption cannot cure a lack of competency.
2. How should you respond to the loan officer's value target and form instruction? Address independence, assignment conditions, and reporting.
Read the worked answer
The $350,000 figure is a value target, not an assignment condition. The Ethics Rule prohibits accepting an assignment with compensation or results contingent on a predetermined value. You must develop and report value independently; if the evidence supports less, say so. The client may request a form, but the appraiser determines the appropriate reporting format. Using a 1025 and calling the property a duplex would misrepresent the property and the scope of work. Document the loan officer's request in the workfile, explain why the form is inappropriate, and offer a general or narrative report. If the client insists on a predetermined value or a misleading form, decline the assignment. Independence also means not being influenced by the promise of future work. The report must accurately describe the property rights, property type, and scope, and must not omit the commercial component.
3. What record-keeping and disclosure obligations apply if you complete the assignment?
Read the worked answer
Retain the workfile for at least five years after delivery, or two years after final disposition of a judicial proceeding, whichever is later. The workfile should include the order, the loan officer's instructions and your responses, inspection notes and photos, zoning and assessor data, rent data, the consultant's qualifications, and the final report. Disclose in the report the competency steps taken, any consultant's role and responsibility, the scope of work, the mixed-use nature of the property, and any extraordinary assumptions. If you used a hypothetical condition, such as assuming a lease or repairs, disclose it and explain why. Do not allow the client to edit the report in a way that misrepresents the property; you remain responsible for the report's content.