CAADE Legal & Ethical Considerations in Appraisal 2 — Questions and Answers
Question 1: An appraiser discovers the vehicle owner is also a close personal friend. What is the most ethical course of action?
- Complete the appraisal but note the relationship in the report
- Disclose the relationship and recuse yourself if objectivity may be compromised (Correct answer)
- Complete the appraisal without disclosure since friendship doesn't affect accuracy
- Charge a reduced fee to compensate for the conflict
Correct answer: Disclose the relationship and recuse yourself if objectivity may be compromised
Disclosing conflicts of interest and recusing oneself when objectivity may be impaired is a fundamental ethical obligation for appraisers.
Question 2: Under the Uniform Standards of Professional Appraisal Practice (USPAP), which document establishes the appraiser's agreement with the client?
- Certification statement
- Engagement letter
- Scope of work agreement (Correct answer)
- Appraisal report
Correct answer: Scope of work agreement
The scope of work agreement outlines the terms, conditions, and limitations agreed upon between the appraiser and client before the assignment begins.
Question 3: A damage estimator is pressured by a shop owner to inflate repair costs on an insurance claim. Complying with this request would constitute:
- Acceptable business practice if authorized by the vehicle owner
- Insurance fraud, a criminal offense (Correct answer)
- A civil violation only, not criminal
- Standard negotiation practice in the industry
Correct answer: Insurance fraud, a criminal offense
Intentionally inflating repair costs on an insurance claim constitutes insurance fraud, which is a criminal offense in all U.S. jurisdictions.
Question 4: Which legal doctrine holds an appraiser liable when a third party relies on a negligently prepared appraisal report?
- Strict liability
- Vicarious liability
- Negligent misrepresentation (Correct answer)
- Respondeat superior
Correct answer: Negligent misrepresentation
Negligent misrepresentation holds appraisers liable to foreseeable third parties who suffer damages by reasonably relying on inaccurate appraisal information.
Question 5: An appraiser is asked to provide a 'drive-by' appraisal without physically inspecting the vehicle. This approach:
- Is acceptable if the client requests it in writing
- Requires disclosure as a limited-scope appraisal with noted assumptions (Correct answer)
- Is prohibited under all circumstances by professional standards
- Is standard practice for salvage vehicles
Correct answer: Requires disclosure as a limited-scope appraisal with noted assumptions
A limited-scope appraisal is permissible if the appraiser clearly discloses the limitations, assumptions made, and extraordinary assumptions in the report.
Question 6: Which federal law most directly governs privacy of consumer information obtained during an automotive appraisal involving a financial transaction?
- Fair Credit Reporting Act (FCRA)
- Gramm-Leach-Bliley Act (GLBA) (Correct answer)
- Driver's Privacy Protection Act (DPPA)
- Consumer Financial Protection Act (CFPA)
Correct answer: Gramm-Leach-Bliley Act (GLBA)
The Gramm-Leach-Bliley Act requires financial institutions and related service providers to protect the privacy of consumer financial information.
Question 7: An appraiser who signs a report prepared entirely by an unlicensed assistant without reviewing it is guilty of:
- Unauthorized delegation
- Appraisal fraud through rubber-stamping (Correct answer)
- Only a minor procedural violation
- Acceptable supervisory practice
Correct answer: Appraisal fraud through rubber-stamping
Signing a report the appraiser did not prepare or adequately review constitutes appraisal fraud, as the signature certifies the appraiser's personal analysis.
CAADE Legal & Ethical Considerations in Appraisal 2
An appraiser discovers the vehicle owner is also a close personal friend.
What is the most ethical course of action?