Just because it’s legal, doesn’t make it ethical. This was one of the first points L. Deane Wilson (The Blackwell Group) made in his recent ASA webinar, “Ethics and the Appraiser.” Besides explaining the theories that underpin professional ethics and the applicable standards, he gives concrete examples of what it means for the individual appraiser to act ethically.
Be competent: Does competence belong among the ethics rules? Absolutely, Wilson says. In practice, this means an appraiser must only take on assignments he or she can handle.
Self-regulate: Appraisers are human beings, too, but to do good work means to control one’s emotions, Wilson says. Know your motives and biases and understand how they may influence the valuation at hand. For example, do you take on a project because of your profound dislike of the IRS or because you want to help a client in need? If so, don’t let those feelings skew the actual data or approach to work, Wilson advises.
Avoid pitfalls in report writing: Wilson lists a number of techniques some appraisers use when writing their reports that he considers unethical.
(1) Hypotheticals. A valuation must be based on reasonable analysis, Wilson reminds the audience. It is not acceptable to use hypotheticals for the purpose of injecting values that have no connection to the facts at hand and may confuse the analysis.
(2) Opinion. Wilson says that subjective phrases such as “I feel” or “I believe” have no place in an appraisal report. As he sees it, performing a valuation is more science than art. It’s a technique the appraiser applies to all assignments: define the problem, plan the appraisal, collect the data, apply the relevant valuation methods, and arrive at a value conclusion. Under this approach, the only logical and justifiable place for the phrase “in my opinion” is at the end of the report. Otherwise, the phrase merely serves to disguise speculation.
Wilson also cautions against using the phrase “based on my experience.” Unless the appraiser connects his or her experience to the problem at issue, those words have no place in a report, he says. It’s not uncommon for valuators to use them to conjure up authority or justify an outcome that the facts don’t support, but it’s unacceptable.
(3) Fudging. Appraisers need to guard against copying entire sections of data from another report without connecting it to the valuation at issue. Even more inappropriate is copying data from a report a different appraiser prepared without independently verifying the data, Wilson states.
(4) Rounding. Experts do it all the time: rounding up or down. Be careful and be consistent, Wilson advises.
(5) Jargon. There is no reason for jargon in a report, Wilson says. It may confuse some people, so you should define words in language that’s understandable to the average reader.
(6) Countervailing data. Appraisers often are hesitant to include data that contradict their value conclusions. Omitting relevant, conflicting data is not a smart approach because chances are high that the opposing valuator is aware of data that may discredit the valuation and is likely to point to them in his or her report or testimony. The proper way to handle contradictory information is to include it and explain why it does not apply in the case at hand, Wilson advises.