An AMC offers an appraiser $200 for an appraisal assignment when the customary and reasonable fee for similar assignments in the market is $450. The appraiser should:
Correct Answer
B) Negotiate a fee that meets customary and reasonable standards
Appraiser Independence Requirements mandate that appraisal fees be customary and reasonable. The appraiser should negotiate an appropriate fee that meets these standards rather than accept an unreasonably low fee that could compromise the quality of the appraisal or appraiser independence.
Why This Is the Correct Answer
Option B is correct because AIR specifically requires that appraisal fees be customary and reasonable for the market and type of assignment. The appraiser should negotiate to bring the fee in line with the $450 market standard rather than accept the inadequate $200 offer. This protects both the appraiser's independence and ensures adequate compensation to complete a quality appraisal. Accepting unreasonably low fees can lead to regulatory violations and compromised work quality.
Why the Other Options Are Wrong
Option A: Accept the assignment if no other work is available
Accepting the assignment due to lack of other work violates AIR requirements and sets a dangerous precedent. Financial pressure doesn't justify accepting fees that are less than half the customary rate, as this could compromise the quality and independence of the appraisal work.
Option C: Complete the assignment but note the fee issue in the report
Simply noting the fee issue in the report doesn't address the fundamental violation of AIR requirements. The appraiser would still be accepting an unreasonably low fee, which could compromise independence and work quality regardless of disclosure in the report.
Option D: Accept the assignment and reduce the scope of work accordingly
Reducing the scope of work to match the lower fee is inappropriate and potentially dangerous. The scope of work should be determined by what's necessary to produce a credible appraisal, not by fee constraints, and such reduction could result in an inadequate or misleading appraisal.
C&R Fee Defense
Remember 'C&R DEFEND': Customary & Reasonable fees must be DEFENDed through negotiation. Never accept fees that are significantly below market standards, as this violates AIR and compromises independence.
How to use: When you see a question about low appraisal fees, think 'C&R DEFEND' - the appraiser must defend the customary and reasonable fee standard through negotiation, not acceptance of inadequate compensation.
Exam Tip
Look for fee amounts that are significantly different from market standards in questions - this often signals an AIR violation scenario where negotiation is the correct response.
Common Mistakes to Avoid
- -Accepting low fees due to financial pressure or lack of work
- -Thinking that disclosing fee issues in the report makes acceptance acceptable
- -Reducing scope of work to match inadequate fees rather than negotiating proper compensation
Concept Deep Dive
Analysis
This question tests knowledge of Appraiser Independence Requirements (AIR) under the Dodd-Frank Act, specifically the requirement that appraisal fees be customary and reasonable. The concept protects against pressure that could compromise appraisal quality or independence. When fees are significantly below market standards, it creates potential for rushed work, corner-cutting, or undue influence from AMCs or lenders. The appraiser has both a professional obligation and legal requirement to ensure compensation allows for proper completion of the assignment.
Background Knowledge
The Dodd-Frank Act established Appraiser Independence Requirements (AIR) to prevent undue pressure on appraisers and ensure quality appraisals. One key provision requires that appraisal fees be customary and reasonable for the market area and type of assignment. This protects against AMCs or lenders using artificially low fees to pressure appraisers or compromise appraisal quality.
Real-World Application
In practice, appraisers regularly encounter AMCs offering below-market fees. Professional appraisers maintain fee schedules based on local market standards and negotiate with AMCs to ensure adequate compensation. Those who consistently accept low fees often struggle with quality issues and may face regulatory scrutiny.
More Report Writing Questions
Under FIRREA, which federal agency has the authority to set minimum standards for real estate appraisals in federally related transactions?
What is the minimum transaction threshold for requiring a state licensed or certified appraiser under Title XI for most federally related transactions?
The Dodd-Frank Act established which requirement specifically related to appraisal independence?
Which of the following is NOT a responsibility of the Appraisal Subcommittee (ASC)?
State appraiser regulatory agencies are primarily responsible for which of the following functions?
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