"Undue Influence"

The definition of an appraisal is an unbiased opinion of value.  In addition the Uniform Standards of Professional Appraisal Practice (USPAP) require that an appraiser;
1.  Have no bias with respect to the property.
2. That the appraisal result is not contingent upon a predetermined result.
3. The appraiser's compensation is not contingent upon the reporting of a predetermined value.
4. The appraiser has no past, present or anticipated interest in the property being appraised.

The Uniform Standards of Professional Appraisal Practice were developed by the Appraisal Foundation as authorized by the US Congress in response to numerous appraisal irregularities arising during the  Savings & Loan Crisis back in the early 1980's.  These irregularities caused a high degree of foreclosures with little or no equity for homeowners resulting in huge losses for mortgage lenders.

Sadly, it appears that we may be entering into another phase of heavy mortgage losses resulting from predatory lending practices including undue influence being exerted on appraisers by mortgage brokers, real estate agents and others.  Appraisers are reporting significant increases in pressure being exerted to deliver results that exceed the actual market value of property resulting in both the buyer and the mortgage lender believing that an equity position may exist when in fact, it does not. 

This issue would not exist without the participation of appraisers.  Normally, I would say "willing participation."  However, when those who engage appraisers demand a specific result under threat to either withhold payment or future assignments, the word "willing" hardly applies.

Nevertheless, if all appraisers flatly rejected these demands, these unscrupulous  brokers and agents would have no place to turn.   Government agencies do their best to police these bad practices, but apparently the numbers involved are simply too great to uncover everyone.

This issue of undue influence is hardly limited to just the appraisal of real property.  As an appraiser of commercial machinery and equipment, I am frequently approached to deliver a desired end result.  And just as frequently, I decline those assignments. 

How can an appraiser of commercial machinery be effected?  In several ways including; a property settlement case where the attorney for one party seeks a favorable result, or a client stipulates a desired value for a non cash charitable contribution.   I have even been approached by either the  buyer or seller of a business to produce a higher or lower value for the equipment of a specific sale of a business.

Undue influence is everywhere and can originate with any potential client.  The one sure way to stop it in its tracks is to maintain a high ethical standard and not deviate from it.  I can honestly say that my business has actually increased due to the public perception that I am honest, without bias and will not submit to pressure.  If every appraiser did the same, not only would the pressure to deliver predetermined results diminish but appraisers may actually see an increase in business activity due to an enhanced reputation.