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The Pitfalls of Small Chit-Chat

Q: " I inspected a property as part of a refinance assignment. I gave the borrower my business card, as I always do at an inspection. The borrower was not watching me like a hawk, but he was kind of hovering around, as I went room by room. We were also chatting a bit. At one point he asked how long it would take to finish the report. I replied that I would have to check my assignment to see if there was a specific due date, but that I typically get the report turned into the client within 5 days from the inspection date. I probably said more than I should have said, but I thought this was just casual chit chat.

I did not have a specific due date on the assignment but I got sick for a couple of days, and this report was completed and turned into the client 8 days after the inspection. I just got a Certified Letter from this borrower. He is chastising me for my “unprofessional” behavior. He says if a professional promises performance by a certain date, they should stick to that. Since I was “unprofessional” and since my work was “late” he is demanding that I refund him 20% of the fee I was paid for this report. If I don’t send him the money, he is going to complain about my “unprofessional” behavior to the licensing board because this is a matter of ethics!

I called my client and they confirmed that my report was not late. I have to assume the borrower found out from them when the report was turned in, although they won’t admit to that. I don’t think I owe this guy anything. The letter is ridiculous. My wife says we are talking about $60 and maybe I should just send him a check. What do you think? "

A: Unfortunately, you may have said a little too much while chatting with the borrower. It’s better to assume that all information divulged is never casual chit chat. Despite that, I do not believe you “owe” him anything. The borrower was not your client.

How you choose to respond is a business decision for you to make. One option would be to simply ignore the letter. However, if the borrower took the time to write the letter, and to send it via Certified Mail, he likely will not accept being ignored.

You could send a polite response saying that you are sorry for any misunderstanding. You can reiterate that the report was completed and turned in to the client in a timely manner and that you did not mean to imply that you were promising the report would be delivered by a certain date. You were retained to complete an assignment, you completed the assignment, and you deserve the fee you were paid for that work. If the borrower does not like your response, he may well make a complaint to the State Board. While I do not think your conduct would be considered an ethical violation under USPAP, you would still have to deal with the investigation.

As your wife suggested, you could respond and make the payment he has requested. You could, again, state that you did not intend to mislead him into thinking that you had promised to complete the report by a certain date. You could remind him that he is not the client and that the client/AMC has not deemed that your work was late but despite your belief that you owe him nothing, you are sending him a payment as a gesture of good faith. If any appraiser was planning to make a payment like this, I would always suggest that they only do so if the claimant is willing to sign a release.

The release would be a simple document that states in return for the payment, the claimant agrees to release you from any and all “claims” he might have arising from the appraisal. Some appraisers are hesitant to suggest the release. They are concerned that it would make the claimant suspicious and bring up concerns such as “Why would you be asking him to sign a release? You must think there is a problem with the appraisal?”

Perhaps take some time to think this over and decide which way you would like to go. I would be happy to discuss your options further and will assist in any way I can.

Would you like Claudia to manage your liability concerns?