Question:

I am considering the sale of my appraisal practice. What are my USPAP obligations regarding confidentiality and record keeping?

Response:

In the sale of an appraisal practice, the selling appraiser must comply with the Confidentiality and Record Keeping sections of the Ethics Rule.

The Confidentiality section of the ETHICS RULE states:

An appraiser must protect the confidential nature of the appraiser-client relationship.

An appraiser must be aware of, and comply with, all confidentiality and privacy laws and regulations applicable in an assignment.

An appraiser must not disclose confidential information or assignment results prepared for a client to anyone other than the client and persons specifically authorized by the client…

The Record Keeping section of the ETHICS RULE states:

An appraiser must have custody of his or her workfile, or make appropriate workfile retention, access, and retrieval arrangements with the party having custody of the workfile.

The selling appraiser can retain possession of the workfiles to satisfy confidentiality and record keeping obligations. This would also satisfy any client-confidentiality agreements and applicable privacy laws and regulations.

The selling appraiser must adhere to the requirement to (1) protect the appraiser-client relationship and (2) not disclose assignment results and confidential information to anyone other than the client and persons specifically authorized by the client. This can be accomplished by seeking client authorization to disclose assignment results and confidential information that would be part of the workfile. Providing the acquiring appraiser with access to the selling appraiser’s workfiles without client authorization is a violation of the Confidentiality section of the ETHICS RULE.

With client authorization, the selling appraiser can provide the acquiring appraiser with access to the selling appraiser’s workfiles. However, the selling appraiser should also consider the impact of applicable privacy laws and regulations.

To comply with the Record Keeping section of the ETHICS RULE, the selling appraiser should make appropriate workfile retention, access, and retrieval arrangements as part of the sale terms.