CAADE Legal & Ethical Considerations in Appraisal 4 — Questions and Answers
Question 1: An appraiser accepts a 'success fee' — extra payment only if the appraisal reaches a specific value threshold. This arrangement:
- Is acceptable if disclosed to all parties
- Violates ethics standards as it creates a direct conflict of interest (Correct answer)
- Is standard practice for salvage appraisals
- Is only prohibited for licensed appraisers, not certified ones
Correct answer: Violates ethics standards as it creates a direct conflict of interest
Contingent fees tied to a predetermined value create a direct financial incentive to produce a biased appraisal, which is prohibited by professional ethics standards.
Question 2: Under the Driver's Privacy Protection Act (DPPA), a vehicle appraiser may legally access motor vehicle records for:
- Personal curiosity about a neighbor's vehicle history
- Legitimate appraisal or valuation purposes (Correct answer)
- Marketing solicitations to vehicle owners
- Investigative journalism purposes
Correct answer: Legitimate appraisal or valuation purposes
The DPPA permits access to motor vehicle records for permissible purposes, which include legitimate appraisal and valuation activities.
Question 3: When an appraiser identifies a previously undisclosed salvage title during inspection, the ethical obligation is to:
- Ignore it if the client didn't ask about title history
- Disclose the finding in the appraisal report regardless of its impact on value (Correct answer)
- Contact the DMV without informing the client
- Only mention it if it reduces value by more than 10%
Correct answer: Disclose the finding in the appraisal report regardless of its impact on value
Material facts discovered during an appraisal, including salvage title history, must be disclosed in the report as they significantly affect value.
Question 4: A vehicle appraiser who knowingly omits significant hail damage from a report to expedite a sale could face liability under:
- Only professional licensing sanctions
- Fraud, misrepresentation, and potential criminal charges (Correct answer)
- Civil penalties only, capped at the appraisal fee
- No liability if the buyer had opportunity to inspect
Correct answer: Fraud, misrepresentation, and potential criminal charges
Knowingly omitting material defects constitutes fraudulent misrepresentation, which can lead to civil fraud liability, license revocation, and criminal fraud charges.
Question 5: Which best describes the 'reasonable appraiser' standard used to evaluate professional conduct in legal proceedings?
- The opinion of the most experienced appraiser in the region
- What a competent appraiser with similar training would do under the same circumstances (Correct answer)
- Strict compliance with every USPAP provision regardless of context
- The standard set by the appraiser's professional association only
Correct answer: What a competent appraiser with similar training would do under the same circumstances
The reasonable appraiser standard evaluates conduct against what a competent professional with similar qualifications would do in the same situation.
Question 6: An independent appraiser hired by a claimant in a disputed insurance claim is ethically required to:
- Always support the claimant's position since they hired and pay the appraiser
- Provide an honest, independent opinion regardless of who hired them (Correct answer)
- Negotiate a settlement rather than provide an objective value
- Coordinate strategy with the claimant's attorney before the appraisal
Correct answer: Provide an honest, independent opinion regardless of who hired them
Even when hired by one party, an independent appraiser must provide an honest and objective opinion; advocacy is the role of attorneys, not appraisers.
Question 7: Retention of appraisal work files under USPAP is required for a minimum of:
- 1 year from the date of the appraisal report
- 5 years from the date of the report or 2 years after final legal disposition, whichever is longer (Correct answer)
- 3 years for insurance appraisals only
- 7 years for all appraisal types
Correct answer: 5 years from the date of the report or 2 years after final legal disposition, whichever is longer
USPAP Record Keeping Rule requires retaining work files for at least 5 years after preparation or 2 years after final disposition of any judicial proceeding, whichever is longer.
CAADE Legal & Ethical Considerations in Appraisal 4
An appraiser accepts a 'success fee' — extra payment only if the appraisal reaches a specific value threshold.
This arrangement: