July 17, 2015

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflict of Interest Rule

Room N-5655, U.S. Department of Labor

200 Constitution Avenue NW.

Washington, DC 20210

To Whom It May Concern:

On behalf of the largest professional association of real estate appraisers in the world, thank you for the 

opportunity to comment on the U.S. Department of Labor (DOL) Employee Benefits Security 

Administration Proposed Rule on the Definition of the Term Fiduciary; Conflict of Interest Rule-Retirement 

Investment Advice. Designated members of the Appraisal Institute commonly provide appraisal services 

to pension funds and institutional investors that invest in real estate. Additionally, many Designated 

members provide a variety of professional valuation services, including appraisals and reviews, for these 

pension funds and institutional investors. 

Generally, while we are pleased the DOL has listened to the concerns of real property appraisers and 

others relative to the treatment of appraisals used to satisfy required reporting and disclosure rules, 

however, we remain deeply concerned by the proposal’s continued extension of fiduciary status under 

ERISA to real estate appraisers in important situations. 

Specifically, section (a)(1)(iii) states: 

An appraisal, fairness opinion, or similar statement whether verbal or written concerning the value 

of securities or other property if provided in connection with a specific transaction or 

transactions involving the acquisition, disposition, or exchange, of such securities or other 

property by the plan or IRA;

This firmly captures a common situation where appraisals are prepared for pension funds considering 

acquiring or disposing of certain properties. Such services are performed to help investment managers or 

fund sponsors make sound investment decisions. 

Lack of Definitions

Our concerns stem primarily from the lack of distinction between “appraisals” prepared for investment 

managers and “fairness opinions.” The proposed rule confuses the role of appraisals in buy and selling 

decisions, as the role of fiduciary is maintained by the investment manager, not the appraiser. The 

investment manager considers the appraisal, and compares that with other information (e.g., offers made 

on property), to make determination in the best interest of the fund. The appraiser does not carry that 

responsibility or decision making authority, and contrary to the proposed rule, performs such work in 

accordance with generally accepted appraisal standards without advocacy to the client. Once the 

appraiser has completed the valuation assignment, the fairness opinions are decided by the investment

manager or third party, who then holds the fiduciary decision responsibilities regarding the transaction. 

Once the appraisal opinion is provided, the work of the appraiser is completed and that work can be used 
Definition of the Term Fiduciary; Conflict of Interest Rule-Retirement Investment Advice

July 17, 2015

Page Two

by others to help make fiduciary decisions. These buy and sell decisions will be based on a variety of 

considerations with the appraised value being only one. 

Fairness opinions differ vastly from appraisals, as they essentially represent the work an investment 

manager might perform, by a third party. Fairness opinions answer a different question than appraisals. 

While appraisals may provide information to an investment manager or answer whether the value of the 

property is within a stipulated range of a price, it does not answer the question as to whether the price of 

the terms are “fair.” Such opinions can be offered by appraisal professionals, but such a service would not 

be considered an “appraisal.” This is an important distinction that is currently not found in the proposed 

rule, but is essential for any final rule. 

Cost Increases

We have consulted with insurance providers to the appraisal profession, and such a change will likely 

result in a dramatic increase in insurance costs for valuation firms providing such a service. This will likely 

cause some to reconsider providing such important services, altogether. This is needless and 

unnecessary, as the DOL still has not provided clear evidence for why appraisers should be covered 

under the fiduciary definition. To our knowledge, the DOL has not attempted and had difficultly bringing 

enforcement actions against appraisers, or has not explained how that process is impeded by the lack of 

fiduciary coverage. 

Recommendations

We urge the DOL to resolve these concerns by undertaking specific actions in any final rulemaking: 1) 

provide clear definitions for appraisals and fairness opinions, and 2) provide an exemption for appraisals

prepared for specific transactions involving the acquisition, disposition or exchange of real estate. This 

would distinguish fairness opinions, whether provided by appraisers or others, as carrying a fiduciary 

responsibility – a position that is reasonable given the purpose of the fairness opinion. 

Instances of Appraisals Contained Within a Fairness Opinion

Insofar as appraisals may be included as a part of a fairness opinion, as long as the work of the appraiser 

is limited to valuation questions (as opposed to questions of fairness), we believe that work should be 

exempt from fiduciary status. That responsibility rests on the shoulders of the individual(s) providing the 

fairness opinion. If the appraiser provides the appraisals and the fairness opinion, we believe that should

be classified as a fiduciary. 

Thank you again for the opportunity to comment on the proposed rule. We look forward to working with 

the DOL to answer any remaining questions and resolve these concerns. Please contact Bill Garber, 

Director of Government and External Relations at 202-298-5586, bgarber@appraisalinstitute.org or Brian 

Rodgers, Manager of Federal Affairs, at 202-298-5597, brodgers@appraisalinstitute.org. 

Sincerely, 

Appraisal Institute