Question:

Is it ethical for an appraiser to offer a client a reduced fee on an appraisal if the client’s loan does not close?

Would the result be different if the client agreed to pay extra for other assignments?

Response:

Neither practice would be ethical. Offering a client a reduced fee on an appraisal if the client’s loan does not close is a violation of the ETHICS RULE. The Management section of the ETHICS RULE states:

It is unethical for an appraiser to accept an assignment, or to have a compensation arrangement for an assignment, that is contingent on any of the following:

1. the reporting of a predetermined result (e.g., opinion of value);

2. a direction in assignment results that favors the cause of the client;

3. the amount of a value opinion;

4. the attainment of a stipulated result; or

5. the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the assignment’s purpose. (Bold added for emphasis)

Standards Rule 2-3, 3-3, 5-3, 6-9, 8-3, or 10-3, as applicable, also requires an appraiser to state that their compensation for completing the assignment is not contingent upon a subsequent event. Being paid “extra” for other assignments does not change this result.