Question:

A new bank client recently sent me a letter acknowledging that my firm is approved to conduct appraisal assignments for their company. It goes on to state that we are now “preferred providers” and expresses the bank’s desire to embark on a mutually beneficial long-term relationship. The letter ends with a solicitation for my firm’s banking business as part of this mutually beneficial relationship. I would like to make them happy because they could provide my firm a great deal of business. If I bring my banking business to this company, while I’m engaged as an appraiser, would I be violating USPAP?

Response:

The answer to this question depends on whether the bank’s approval of your firm as a “preferred provider” is conditional on your moving your banking business to that bank. The Management section of the ETHICS RULE states:

The payment of undisclosed fees, commissions, or things of value in connection with the procurement of an assignment is unethical.

Comment: Disclosure of fees, commissions or things of value connected to the procurement of an assignment must appear in the certification and in any transmittal letter in which conclusions are stated.  In groups or organizations engaged in appraisal practice, intra-company payments to employees for business development are not considered to be unethical.  Competency, rather than financial incentives, should be the primary basis for awarding an assignment.

If the lender has stated that your firm can only have their appraisal business if you bank with them, this relationship must be disclosed as described in the ETHICS RULE.

However, if the client is merely soliciting your business as it would any other potential customer, and you subsequently moved your banking business to that bank, there is no requirement in USPAP to disclose your banking relationships.