January 5, 2011 

Phyllis C. Borzi 

Assistant Secretary 

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Ave., NW 

Washington, DC 20210 

Re: Definition of “Fiduciary” Proposed Rule

Dear Ms. Borzi: 

On behalf of the nearly 30,000 members of our respective professional associations of real estate appraisers, we 

welcome the opportunity to comment on the Department of Labor’s (“DOL”) Proposed Rule on the definition of 

“fiduciary”. The proposed rule offers a wholesale revision to its regulation that defines the term “fiduciary” under 

the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. The proposed rule will 

affect whether appraisers, consultants, insurance agents, and others who work with pension and 401(k) plans and 

IRAs will be deemed to be fiduciary investment advisors. The consequences of being a fiduciary include a 

difference in the duty of care applicable to one’s conduct, prohibitions on receipt of additional fees, prohibitions 

against recommending affiliated products or services, and prohibitions against engaging in principal transactions. 

Our organizations are deeply concerned by the proposal’s extension of fiduciary status under ERISA to real 

estate appraisers. We believe the proposed rule will unnecessarily increase liabilities (and hence, costs) for 

appraisers, needlessly driving competent appraisers from the marketplace, while increasing costs to users of 

appraisal services. Given conditions facing the real estate market and the economy as a whole, arming investors 

with competently prepared and unbiased real estate information is of critical importance and central to the 

economic recovery. We respectfully ask the DOL to suspend the effort to extend fiduciary status to real estate 

appraisers given that they do not provide “investment advice,” and in light of the myriad of enforcement outlets 

that protect the appraisal profession and users of appraisal services. 

Role of Real Estate Appraisers

As you may know, the role of real estate appraisers is to provide objective, impartial, and unbiased opinions about 

the value of real property to their client. Many appraisers are retained to provide such opinions by pension funds 

and other institutional investors for a variety of reasons, but including mortgage financing, portfolio monitoring, 

financial reporting and asset management. The role of the appraisal is primarily risk management relating to real 

estate. 

In the proposed rule, DOL contends that real estate appraisers significantly influence the decisions of plan 

fiduciaries, and have a considerable impact on plan investments. Further, the DOL claims that these advisers 

may operate with conflicts of interest that they need not disclose to the plan fiduciaries who expect impartiality 

and often must rely on their expertise. 

These statements are incorrect. Real estate appraisers do not act as advocates, but rather objective third parties 

who provide opinions of value based on research and analysis. The very definition of an appraiser is “one who is 

expected to perform valuation services competently and in a manner that is independent, impartial and 
DOL Fiduciary 

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January 5, 2011 

objective.”1Independence and objectivity are two characteristics that differentiate the services of our members 

from those conducted by real estate agents, investment advisors, accountants and others providing value 

opinions in the market. Appraisers do not give advice; rather they provide an objective read of the property value 

given observed market conditions. 

We firmly believe that offering investment advice is vastly different than providing objective opinions of value. One 

who offers investment advice is acting as an advocate for their client. Further, a fiduciary is someone who 

advocates at all times for their clients2. Under the Uniform Standards of Professional Appraisal Practice (USPAP), 

it is prohibited for appraisers to accept contingent fees. Further, under the Ethics Rule of USPAP an appraiser 

“must not advocate the cause or interest of any party or issue.” Lastly, USPAP does not permit an appraiser to 

accept an assignment if the appraiser would be biased. Further, if the appraiser has an interest in the property or 

parties, the appraiser can accept that assignment only if (1) having the interest does not cause the appraiser to be 

biased and (2) the interest is disclosed to the client up front and in the report. 

For these reasons, we strongly object to including real estate appraisers in the same category as those who give 

investment advice when real estate appraisers, in the normal course of their practice, do real estate appraisals 

subject to USPAP and professional standards and rules. 

Existing Enforcement Outlets

Our organizations share your concern with incompetently performed - or even fraudulent appraisals - that is why 

we firmly believe that the best way to gain a clear analysis of current market trends and reduce risk is to have 

appraisals prepared by competently qualified appraisers with greater than minimum standards and a designation 

from accepted international valuation organizations. 

Existing regulations governing valuations of real property provide ample protection for the general public. Real 

estate appraisers already face significant federal and state regulation, including minimum state licensing and 

robust self regulation by those who participate in professional appraisal organizations such as ours. They are 

subject to a myriad of fraud statutes and they are subject to state appraiser licensing laws, which include USPAP. 

These standards carry the force of law, and many appraisers lose their licenses every year as the result of 

USPAP violations or other transgressions. Adding a fiduciary liability will simply increase costs and drive away 

competent appraisers. 

Moreover, regarding an appraiser’s adherence to USPAP, this is no different than any other context, one party or 

another may have an interest in seeing a transaction done at a certain valuation, but the appraiser has a 

professional duty to provide his best impartial opinion. Federal banking law has required the participation of 

appraisers in certain transactions without imposing a fiduciary duty and it is our view, banking law should be the 

model for ERISA on this point. 

Employee Stock Ownership Plan (“ESOP”)

It is our understanding that a great deal of DOL’s concern relates to Employee Stock Ownership Plans (ESOPs). 

As you may know, the standards of practice and oversight of this segment of appraisal are vastly different than 

real estate. Where real estate appraisers adhere to a common set of uniform standards and a nationally licensing 

 

1

 From the Uniform Standards of Professional Appraisal Practice. Definitions. Available at 

http://www.uspap.org/2010USPAP/USPAP/frwrd/definitions.htm 

2

“In a fiduciary relation one person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and 

trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one 

to act at all times for the sole benefit and interests of another, with loyalty to those interests.” Available at 

http://en.wikipedia.org/wiki/Fiduciary 
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regime, ESOP appraisers do not. We urge the DOL to recognize the differences in regulatory structures as it 

moves to develop a final rule. 

Need for Proposed Rule

Our organizations have conferred with errors and omissions insurance providers to the real estate appraisal 

profession regarding this proposed rule and appraisal work conducted for pension funds. These firms are not 

aware of any claims being brought by pension funds for the performance by real estate appraisers. This suggests 

that the perceived problem in real estate appraisal may be little or insignificant. 

Still, we understand and share the DOL’s concerns about enforcement in the appraisal profession. There are 

segments of the profession (business and personal property appraisal, for instance) that are not subject to state 

licensing requirements, like real estate appraisers. Still, the function of the appraiser as an independent 

professional is the same. 

To the extent that we can help the DOL understand the appraisal process and assist with appraisal reviews and 

enforcement, we would be pleased to do so. Our organizations have an extensive body of knowledge and 

significant resources that may be helpful in building legitimate fraud cases. For instance, the Appraisal Institute 

has provided training to the Federal Bureau of Investigation for agents and analysts involved in residential and 

commercial mortgage fraud issues, and we have provided extensive information to the federal Financial Fraud 

Enforcement Task Force. Further, the American Society of Farm Managers and Rural Appraisers has extensive 

coursework and an accreditation program for Rural Property Review Appraisers (RPRA) for appraisal review. 

This professional avenue is used by many in the appraisal review function within the Federal Government as well 

as the private sector. We would be pleased to meet and discuss the possible ways that we can help in the area 

of pension fund investments oversight and enforcement, not only as a matter of public interest, but to avoid 

increasing costs or driving highly competent professionals from this important segment of the marketplace. 

Thank you for the opportunity to comment on the Proposed Rule. Should you have any questions or need 

additional information, please contact Bill Garber, Director of Government and External Relations, Appraisal 

Institute, at 202-298-5586 or bgarber@appraisalinstitute.org, or Brian Rodgers, Manager of Federal Affairs, 

Appraisal Institute, at 202-298-5597 or brodgers@appraisalinstitute.org. 

Sincerely, 

Appraisal Institute 

American Society of Farm Managers and Rural Appraisers