Disclose Contemplated Interest in Property Appraised
A Realtor appraised an apartment building for a seller. The Realtor did not disclose to the seller that they were already the property manager for several other buildings owned by the buyer. However, the Realtor took care not to discuss managing the appraised property with the buyer. According to the Code of Ethics, is this a violation?
Dear Shannon: I’m a highly ethical Realtor®, and I practice in multiple areas of real estate including property management. I’m proud to say I’m also a licensed appraiser. Recently, the seller of an apartment building couldn’t agree on a fair price with a buyer, so they decided to agree to average two appraisals as a reasonable price, each choosing their own Realtor to appraise the property. I appraised the apartment building for the seller. I don’t remember how they found me, but I did a good job. I also happen to be the property manager for a few other buildings the buyer owns, but, let me be clear, we did not discuss me becoming property manager for the property I appraised. After the sale, ultimately, I did become the property manager for the apartment building, but I reiterate, no ethical lines were crossed because the prospective buyer and I had no conversations whatsoever about even the possibility of me becoming property manager of the same building where I did the appraisal. To my surprise, about six months after closing the Seller filed an ethics complaint against me. Evidently, the Seller got a third appraisal after the sale which was about 30% higher than what I came up with. Can you help shed some light here? I Don’t Get It.
Dear Don’t Get It: Thanks for reaching out on this. I hear that you didn’t want to cross ethical lines by not talking to the buyer about you becoming property manager of the same property you appraised. The ethical line was crossed by you not sharing with the seller that you had even a contemplated interest in the property you appraised. Let’s take a closer look at the section of the code that applies here.
Article 5 states: “Realtors® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.” (emphasis added).
The code prohibits you from providing professional services concerning a value where you have a contemplated interest unless such interest is specifically disclosed to all affected parties. In your scenario, you appraised an apartment building for a seller, so you were providing professional services concerning a property’s value. You said you were already the property manager for several other buildings owned by the buyer. Even though you were not appraising a property where you were currently operating as property manager, it is not unreasonable to imagine the buyer might want you to serve as property manager for the property once the buyer owned that building as well. So, it is likely the professional standards hearing panel found that you reasonably had a contemplated interest. You said you didn’t want to cross ethical lines, so you made sure that you and the buyer didn’t have any conversations regarding you becoming property manager after the sale. That was probably not even necessary, because Article 5 doesn’t say you can’t do an appraisal for an apartment building where you have a contemplated interest. It just requires disclosure to all affected parties, which you said you didn’t do. That’s where the ethical line was crossed.
Thank you for reaching out and for sharing your situation. Hopefully, your story will inspire others to seek out education and continued high levels of professionalism.
For more information, see Case #5-1: Contemplated Interest in Property Appraised. Other laws and rules may apply.
Shannon Allen is an attorney and Florida Realtors Director of Local Association Services
Note: Advice deemed accurate on date of publication
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