RAPAPORT... Appraisers’ fundamental tools of the trade are knowledge and honesty. Their clients rely on them to be unbiased in their watchdog role. But what exactly are their ethical obligations to the public? To start, every appraiser is required to conform to the applicable sections of the Uniform Standards of Professional Appraisal Practice (USPAP). If the appraiser is accredited by a society, he or she also must abide by the ethical rules of that organization.
The first stop when it comes to appraisal ethics is The Appraisal Foundation, a nonprofit educational organization established in 1987. During the savings and loan crisis, when it became apparent that lending institutions needed unbiased appraisals, a group of eight American and one Canadian appraisal organizations formed the Ad Hoc Committee on USPAP. The U.S. members agreed on USPAP, a generally accepted set of guidelines for appraisals, and established The Appraisal Foundation to implement them. With the 1989 enactment of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), Congress charged the foundation’s Appraisal Qualifications Board (AQB) with establishing and maintaining minimum standards for state licensing and certification of the nation’s appraisers. Now, more than 80 organizations, corporations and government agencies are affiliated with the foundation.
John Brenan, director of research and technical issues at the foundation, feels that one of the most important aspects of USPAP is its ethics rule, which is divided into sections on conduct, confidentiality, management and record keeping. Brenan recognizes that the rules are “broad and overarching,” and deliberately so, because appraisal assignments vary so tremendously. However, he stresses that it clearly establishes that impartiality is a cornerstone of USPAP.
Conduct, simply put, refers to the fact that appraisers should be impartial, independent and objective. The USPAP states that appraisers should not engage in criminal conduct or communicate their assignment results in a misleading manner.
Confidentiality explains that an appraiser must always act in good faith in the interest of the assignment and should not disclose appraisal results to anyone other than the client.
Management deals with truth in advertising, as appraisers should not solicit assignments in a manner that is false or exaggerated and they should always disclose any commission fees in connection with their assignments.
Record keeping covers the requirement of retaining a workfile on each appraisal for at least five years.
TRUSTWhile USPAP lays the ethical groundwork for the appraisal industry, appraisal associations are on the cutting edge of industry ethics, disseminating rules and determining the methodologies that best reflect the intention of USPAP, all in the name of preserving the public’s trust. Ironically, only one of the four accrediting societies — the International Society of Appraisers (ISA) — keeps its ethical guidelines posted on its website for the public to read. When asked, though, all groups were happy to share their ethical codes. The rules mirror, and often restate, the concepts found in USPAP — the difference is that the societies fill in the details and, in some instances, raise the bar on ethical standards.
AGS
As part of its mission, The American Gem Society (AGS) “embraces ethical business practices protecting the consumer and the consequent success of the jeweler.” The integrity of AGS’s grading standards is high priority.
“I don’t know of another grading system that is monitored by a board. I know everyone says they have grading standards, but how do you know?” asks Diane Flora, AGS’s director of education. Because AGS licenses its name to AGS Laboratories, the society’s Grievance and Review Committee oversees complaints, not only about its members, but also regarding its grading standards and reports.
In the group’s membership manual, the eight-page AGS Minimum Appraisal Standards and Report Guidelines serve as rules for members. Verbal opinions can be given, but members must clarify that oral estimates do not constitute an appraisal, which must be written. Reports must be designed to prevent fraudulent alteration or misuse. Appraisals must be written in a narrative style that is understandable to the layman. Complaints against members accused of violating the guidelines are always made in writing and handled by the Grievance and Review Committee. Members are given at least ten days to respond to any charges brought against them.
NAJAThe National Association of Jewelry Appraisers (NAJA) has a one-page Code of Professional Ethics to ensure its members maintain their integrity. Notably, while other groups’ ethical guidelines focus solely on the rights of the jewelry consumer, NAJA includes a rule designed to protect its members. The society states, “An appraisal represents a considerable outlay of professional service and skill and this counsel entitles the appraiser to a fair and reasonable fee.”
Of course, NAJA appraisers take on plenty of responsibilities, as well. NAJA members are required to have all pertinent facts regarding the item being appraised before deciding on its value, even before giving a preliminary opinion to a client.
Every NAJA member’s appraisal must include a statement that the appraisal was prepared in conformity with generally accepted standards and NAJA’s Code of Professional Ethics. Members should be willing to testify and support their conclusions in a court of law.
NAJA members sign an agreement stating that, in the event of membership cancellation, they will return their certificates, literature, stationary and anything bearing the NAJA seal. The society’s ethical issues chair handles complaints, which must be submitted in writing.
“It’s a long and arduous process,” explains Gail Brett Levine, the group’s executive director. “We react to every complaint that comes in. The member gets a chance to refute the claim and then we go back to the person who complained. But definitely, it has teeth.”
ASAThe American Society of Appraisers (ASA) ethics guidelines cover its members’ moral obligations in almost any situation. Members who know of ethical violations have the duty to report them to the society.
The guidelines also require that an appraisal report from its members must contain a statement of the appraiser’s “disinterestedness,” meaning that the writer has no present or future interest in the outcome, assuring an unbiased result. The report must also state whether or not the member is in compliance with ASA’s mandatory recertification program for senior members.
ASA retains a compliance officer, who trolls eBay and other websites on the lookout for falsified reports and inappropriate use of the society’s titles. Ethics complaints are brought before a review board. Anyone who wants to check a member’s accreditation can visit ASA’s website for title verification — click on “About ASA,” then select “Search for a Member.”
ISAThe four-page Code of Ethics and Professional Conduct guides members of the ISA. Among the rules is one stating that members are not allowed to accept gifts from current or prospective clients. Members are required to safeguard reports from unauthorized scrutiny or seizure — unless legally required — and must make themselves reasonably available during all stages of the appraisal. Accusations of members violating the code must be submitted in writing and ISA investigates every complaint.
“We don’t take it lightly,” stresses Judith Martin, the secretary of the ISA board of directors. “We have to be a self-policing society.” The Ethics Hearing and Discipline Panel decides on disciplinary action on a case-by-case basis.
All organization spokespersons stress that ethical guidelines are not designed to catch appraisers in the act of unethical practices, put them on the defensive or take up time in their busy days. Though the specifics may vary, these rules aim to give clients the utmost confidence in their appraiser. As an ever-increasing number of savvy consumers demand principled business practices, appraisers who are proactive on these issues will have an advantage.
Article from the Rapaport Magazine - June 2008. To subscribe click here.