Upon noticing a bonus structure for appraised value in an engagement letter, what should the reviewer do?

When a reviewer notices a bonus structure tied to appraised value within an engagement letter, reporting the appraiser to the state appraiser board is an appropriate action to take. Such a bonus structure can create a significant conflict of interest and can violate ethical guidelines set forth by the Uniform Standards of Professional Appraisal Practice (USPAP). This is vital in maintaining the integrity and impartiality of the appraisal process.

The state appraiser board typically oversees licensing and enforcement of ethical practices among appraisers. By reporting the appraiser, the reviewer helps ensure that issues of potential misconduct are addressed, which can protect clients and uphold the standards of the appraisal profession. This action contributes to maintaining a fair market and the credibility of appraisals within the industry.

While making a notation in the review report or sending copies to professional appraisal associations may be relevant actions, they do not carry the same weight or authority as directly reporting to the state appraiser board, which has the power to investigate and take disciplinary actions if necessary.