disclosure
Ask Henry Harrison

179) Disclosure

12/10/07
Dear Henry:
I have the greatest respect for your knowledge and opinion. That is why I am seeking your input on an unusal question.

I have two companies. One is a residential appraisal firm and the other does real estate investment and development. Recently, the opportunity came up to invest in a property that my company performed an appraisal on about a year ago.

I intially turned down the investment, because I did not want any hint of financial interest in properties we have appraised. Upon reflection, because the appraisal was conducted a year prior to the investment opportunity, would it be a violation of any ethical standard??

Please understand, that for the 15 years I have been appraising, I have religiously protected our firm's reputation as the most ethical firm in the area. Am I being too conservative by not allowing my real estate investment company to buy an interest in this property now?

Thanks again for all the great advice over the years.
Paul paulgryan@cox.net

Dear Paul,
Thank you for the complements. It is always a problem when an appraiser wears two hats.

There is no specific prohibition against buying a property that you previously appraised. The best way to avoid the appearance of a conflict is to disclose to everyone involved in the transaction that you did an appraisal of the property previously, and get them to sign off that they don't care what you do. You should get the sign-off from those originally involved in the appraisal as well as those involved in the sale to you now.

Even with all of these precautions, there is always a chance of a misunderstanding which could affect your reputation. Only you can decide if that's a risk worth taking.

H2