Appraisal Institute’s new guidance outlines appraisers’ role in arbitration

Chicago, Il The Appraisal Institute, one of the nation’s largest professional association of real estate appraisers, published guidance to help appraisers understand their role when retained in an arbitration.

The Appraisal Institute’s “Guide Note 16: Arbitration” addresses how real estate valuation professionals may provide services in arbitration matters as arbitrators or expert witnesses. Arbitration is an alternate dispute resolution process in which the parties to a dispute agree to present their case to one or more arbitrators who render a final decision to resolve the dispute rather than try the issue in court.

The Guide Note explores what services a real estate valuation professional can provide in an arbitration matter, and what standards and ethical rules apply to different services. According to the Guide Note, a valuer providing a service in an arbitration potentially may be acting within one of the three “circles” presented in the Uniform Standards of Professional Appraisal Practice Advisory Opinion 21:

• Performing an appraisal and/or appraisal review in compliance with certain rules and standards;

• Making arbitral decisions communicated in awards while acting as an appraiser so that certain rules apply, but no standards apply; or

• Making arbitral decisions communicated in awards while not acting as an appraiser so that neither rules nor standards apply other than the duty to not mislead.

The Guide Note further addresses the expectation of the potential client regarding the valuer’s role in the arbitration process. USPAP Advisory Opinion 21 explores this expectation and states, “In summary, expectation [of the intended user] is the basis for determining when an individual providing a valuation service is acting as an appraiser.”

This expectation of the potential client controls the decision, and not the intent or preference of the valuer, according to the Guide Note. The client seeking a valuer to serve as an arbitrator would do so because of a valuer’s education, knowledge and independence, i.e., because of the expectation that the valuer will be “acting as an appraiser.”