Real Estate Appraisers - Client and Intended User
Purpose: This bulletin explains real estate appraisal professionals must take proactive steps to identify their clients and intended users.
This bulletin applies to real estate appraisers and candidates.
Real estate appraisers and candidates owe varying obligations to clients and intended users and need to take proactive steps to identify who are their clients and intended users. This can be more complex when agents enter the appraisal assignment process.
Agents are persons who have the authority to act on behalf of a principal when dealing with others. Agents are clients when they enter into an appraisal service agreement on behalf of their principal. Agents who may request an appraisal include:
- lawyers acting for persons who need real estate appraisals for civil or matrimonial proceedings
- appraisal management companies who enter into appraisal management agreements with lenders to facilitate appraisal orders for lending purposes
- mortgage brokers representing lenders
- accountants who assist companies in developing financial reports
- real estate professionals acting for clients who require real estate appraisals to facilitate their real estate trade
- owners of real property
- oil and gas companies dealing with land owners
The Real Estate Act Rules define a client as a person who has entered into a service agreement with an industry member, whether or not it is in writing. According to the Real Estate Council of Alberta (RECA), a client is the person who enters into an appraisal service agreement with the real estate appraiser or candidate. This may be:
- the person who contacts the appraiser directly to request the appraisal assignment and who will be relying on it
- an agent who has requested the appraiser undertake the appraisal assignment on behalf of a person who will be relying on it
The Uniform Standards of Professional Appraisal Practice (USPAP), the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) also have client definitions. These definitions differ, but do not contradict the definition in the Rules.
USPAP: A client is the party or parties who engage by employment or contract an appraiser assignment. The client may be an individual, group or entity and may engage or communicate with the appraiser or through an agent.
CUSPAP: A client is the party or parties who engage an appraiser by employment or contract. This definition does not explicitly mention agents. As CUSPAP allows for multiple clients simultaneously, an agent may be involved by implication.
Under both practice standards, real estate appraisers should take the necessary steps to determine who are the clients and intended uses of the real estate appraisal. They must not make assumptions as to who is the client or intended user of the report. Real estate appraisers may need to describe the varying obligations during the discussion process so they may reach a proper outcome.
Obligations to clients intended users and third parties
Real estate appraisers must uphold the confidential nature of the appraiser/client relationship. Appraisers must not disclose the data, analyses, opinions, or conclusions in an assignment to anyone other than the client and those persons expressly authorized by the client to receive such information.
The appraisal assignment identifies the intended user and to whom the real estate appraiser professional may give the report. A real estate appraiser professional cannot discuss the appraisal report with the intended user unless expressly authorized by the client.
Appraisers cannot disclose the appraisal report or other client information with third parties such as buyers, mortgage brokers, other parties in the civil proceedings, etc. unless expressly authorized by the client.
The client’s authorization to speak to third parties must be in verifiable form. Duty of confidentiality is the obligation of real estate appraiser professionals and they bear the burden of proof to demonstrate authorization to disclose the confidential information.
Written service agreements for appraisal assignments are a best practice, as assignments in writing may give verifiable consent for real estate appraiser professionals to communicate with intended users.