The Appraiser-Client Relationship and Confidentiality

(by David Maloney) There exists a special relationship between the appraiser and the client, and the appraiser is obligated to protect the confidential nature of that relationship. Specifically, the appraiser must reveal neither the 1) results of an assignment nor 2) any confidential information other than as permitted by the ETHICS RULE.

According to the ETHICS RULE, confidential factual data obtained from the client and the results of an appraisal may be disclosed only to:

The client and anyone specifically authorized by the client, e.g., an insurance company, or, in the case of a divorce, to the client’s attorney,
Third parties authorized by due process of law, e.g., pretrial discovery, depositions, court testimony by the appraiser, or
A duly authorized appraisal society’s peer review committee

As noted, an appraiser must respect the confidential nature of information obtained during the appraisal process. USPAP defines confidential information as:

information that is either: identified by the client as confidential when providing it to an appraiser and that is not available from any other source; or classified as confidential or private by applicable law or regulation. (USPAP)

Disclosing the Client’s Name

But can the appraiser disclose the client’s name for the current or for a prior assignment? While we normally think not, there actually is no definitive answer to this question (2010-2011 USPAP FAQ #42). The Confidentiality section of the ETHICS RULE prohibits the appraiser from disclosing confidential information (as defined above) but also requires the appraiser to:

“…protect the confidential nature of the appraiser-client relationship”

If the client instructs the appraiser to not disclose the client’s name, then that information immediately becomes confidential and must not be disclosed other than in accordance with the ETHICS RULE. On the other hand, if the client has not identified to the appraiser that the client’s name is confidential, then the appraiser must use his or her judgment as to whether doing so will violate the appraiser’s responsibility to “protect the confidential nature of the appraiser-client relationship.”

Technically, barring an agreement between the client and appraiser prohibiting the disclosure of any information at all pertaining to the assignment, the appraiser is allowed to confirm that he or she performed an appraisal on the subject property. The appraiser may also disclose anything else regarding the assignment other than the assignment results (i.e., the appraiser’s value opinions and conclusions) and other than confidential information as defined in the DEFINITIONS section of USPAP.

But in order to best protect the confidential nature of the appraiser-client relationship, most appraisers consider as confidential information the identity of the client, the property being appraised, the results of the appraisal assignment, and any information declared by the client as being confidential. Most appraisers also consider any material in the assignment workfile to also be confidential including computer files, photographs, written notes, telephone logs, etc.

Discussing the Report with Intended Users

The scope of work as well as the content of the report will depend to a large degree not only on the intended use of the report but also on the needs of the client as well as other intended users. For instance, a client might be the executor of the deceased father’s estate and the executor’s siblings might be identified by the appraiser (in communication with the client) as being intended users and having special needs regarding the content of the report. Although intended users other than the client might play an important role regarding report content, they are not entitled to discuss the assignment results or confidential information related to the assignment with the appraiser without the client’s authorization. (2010-2011 USPAP FAQ #48)

Disclosing Past Appraisals as Examples of Appraiser’s Work Product

On occasion, the appraiser may have a need to provide prospective clients with examples of past appraisal reports in order to be considered for an assignment. An appraiser might wish to display a past appraisal of his or her web site as a demonstration of appraisal competence. An appraisal course instructor might wish to make use of a past appraisal report for demonstration purposes in class. All these scenarios have one thing in common—the sample appraisals being used contain confidential information and their use, without modification, would be a violation of the Confidentiality section of USPAP’s ETHICS RULE. (2010-2011 USPAP FAQ #44)

This issue can be overcome by modifying the sample reports (most commonly via redaction) as noted in the Comment to the ETHICS RULE’s Confidentiality section which states:

Comment: When all confidential elements of confidential information and assignment results are removed through redaction, or the process of aggregation, client authorization is not required for the disclosure of the remaining information, as modified.

Copywriting Appraisal Reports

The Appraisal Standards Board does not take a position on whether or not appraisal reports are copyrightable. However, if the process of copyrighting an appraisal report with the U.S. Copyright Office resulted in the disclosure of assignment results or of confidential information, then such a process would violate the Confidentiality section of USPAP’s ETHICS RULE unless prior approval for such a disclosure had been received from the client. (2010-2011 USPAP FAQ #56)

(The above is an excerpt from the 5th edition of Dave Maloney’s award-winning book, Appraising Personal Property: Principles & Methodology (Appraisers Press 2011))