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Protection from Third-Party Appraisal Report Users

by Administrator on Feb 2, 2014 Narrative Writing 1661 Views

SUGGESTION 1:  It's my opinion that the best way to make sure that your clients take responsibility for the dissemination or distribution of your appraisal reports is to get them to agree to protect the reports and your firm in writing.  I'm not an attorney, and I'm not saying that this blurb that follows will totally protect you, but I have used a similar provision in my engagement letters and it has already kept me out of trouble. 

Ask you attorney if this could work for you.  "The client agrees to not disseminate or distribute the appraisal report to be completed to any third-parties without the prior written consent of the appraiser.  In the event that the client provides a copy or copies of the appraisal report by any means of communication to a third-party or third-parties the client agrees to hold the appraiser harmless from any and all claims made by the third-party or court suits brought against the appraiser for reliance on it."

It's a provision that may get your client's attention when he reads the engagement letter, you may even get a few negative responses, but how else can you get your client to treat report dissemination or distribution that can cost you a great deal of money seriously?  Even if you decide to delete the provision, which may be a bad idea, it's your chance to talk to your client about how important it that the report not be communicated to third-parties.

If you are dealing with an owner who is shopping for a mortgage via mortgage brokers this provision may be a real hurdle because they know from the start that their intent is to circulate the report to try and get the best deal they can.  These situations are extremely high risk for an appraiser since one or more of those third-parties may claim that the appraiser has been negligent in some way and / or misrepresented the value. 

You can also consider selectively using the third-party provision that I outlined in some engagement letters but not others, again this may not be the best way to keep your risk at its lowest, but it makes sense to protect yourself when you can.  New, unproven clients should always be considered risky since you have no history with them to rely upon.

The risk associated with doing nothing but hoping that your clients decide not to communicate your reports to others is becoming greater as time goes by.  If you have another strategy that is working for you, that's great.  I'm offering this provision as an alternative since trying to control what happens to your report after it hits the street is difficult.  You can lock a report file or restrict access to it but the growing sophistication of the public is working against you.

Let's face it, third-party reliance on appraisal reports prepared for others is increasing, it's a serious trend that can have you defending yourself against someone who was never intended to have a copy of your report.   It's my opinion that communication of the report should be the responsibility of the client.  It's not that much different from a broker who asks for a confidentiality agreement, but instead of protecting an owner’s property information you are simply protecting your own appraisal report.

SUGGESTION 2:  I have heard all of the arguments about why some people don't think that the content of an appraisal report is copyrighted.  I don't agree with any of them.  If you write commercial reports you have to appreciate how much time and effort goes into writing them.  The data is at times gleaned from public domain websites, there may be portions of the boilerplate that are similar to that used by others, and even the methodology and report outline may be standardized but the format, selection of data and the problem solving are unique. 

If appraisers make it clear to clients, data pirates, mortgage companies and other potential plagiarist that open season on their appraisal reports will not be permitted, and they include warnings in the body of their reports, it may be possible to slow the use of them by third-parties.  You own the report one way or the other, why not claim you ownership rights and notice potential users that they have no right to use or even to read your report?

For more appraisal information contact the author, Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada commercial real property appraiser via email or via his business website Horizon Village Appraisal located at (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

Article source: http://www.appraisalarticles.com/Narrative-Report-Writing/4421-Protection-from-Third-Party-Appraisal-Report-Users.html

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