Re: Toxic Mold and Real Estate valuations-Ethics Violation

[Guest guest]

Regulatory and Institutional Requirements

The USPAP does not specifically address the issue of toxic mold,

however, Advisory Opinion 9 (AO-9) of USPAP is entitled " Responsibility

of Appraisers Concerning Toxic or Hazardous Substance Contamination, "

(USPAP, 2002:142). [it should be noted that Advisory Opinions are

provided for guidance only and " . . . are issued to illustrate the

applicability of appraisal standards in specific situations and to

offer advice from the Appraisal Standards Board (ASB) for the

resolution of appraisal issues and problems, " (USPAP, 2002:123)].

AO-9 indicates that an appraiser who states or implies that they have

specialized knowledge but in actuality do not, is misleading the client

and violating the Ethics Rule of USPAP. ASB recognizes that real estate

appraisers do not necessarily have the knowledge of specialists in

complementary real estate areas. Consequently, it is acceptable for

appraisers to rely on the expertise of other qualified specialists to

provide pertinent information for use in the appraisal of contaminated

real estate. The Appraisal Institute, a professional trade

organization, has issued Guide Notes for its members to help illustrate

the application of USPAP requirements. Although not binding on

nonmembers, the Guide Notes do provide useful guidelines for all real

estate appraisers. Guide Note 8, " The Consideration of Hazardous

Substances in the Appraisal Process, " identifies the growing need for

appraisers to consider hazardous substances in their analysis and

understand that their presence can significantly impact value,

(Appraisal Institute, Guide Note 8: 1994). This includes material on,

or near, a property that may adversely affect value. The Guide Note

further clarifies AO-9 by indicating that most appraisers do not have

the knowledge or expertise to recognize, detect or measure the quantity

of hazardous materials, which includes toxic mold. Furthermore, " . . .

the real estate appraiser is neither required, nor expected, to be an

expert in the special field of detection and measurement of hazardous

substances, " (Appraisal Institute, Guide Note 8, 1994: D-21).

AO-9 notes that an appraiser can become aware of the subject property

being contaminated by normal inspection, client disclosure and/or by

known facts prior to acceptance of the assignment. Once the appraiser

is aware of the possibility of contamination, both AO-9 and Guide Note

8 refer the appraiser to the Competency Rule of USPAP. The Competency

Rule requires the appraiser to either (1) have the knowledge and

experience necessary to competently complete the assignment, or (2)

disclose to the client the lack of knowledge and/or experience, take

the necessary steps to competently complete the assignment, and

describe in the report the lack of knowledge and/or experience and

steps taken to prepare a competent report. If the appraiser is made

aware of the possibility of toxic mold contamination while the

appraisal is underway, and the appraiser does not have the knowledge

and/or expertise to competently address the issue, the appraiser must

comply with the Competency Rule provisions as summarized in (2) above.

A viable option is for the appraiser is to associate with someone who

has the knowledge and/or expertise. Guide Note 8 suggests " . . . that

the client, not the appraiser, choose and hire any qualified

environmental professionals, " (Appraisal Institute, Guide Note 8, 1994:

D-22).