Ethical Case

Topics: Ethics, Real estate appraisal, Real estate Pages: 5 (1468 words) Published: November 10, 2011

Cruickshank, Garth & Romano (CGR) is a new real estate appraisal and consulting firm formed by Chris Cruickshank, Wayne Garth, and Richard Romano. The firm provides not only residential, industrial and commercial evaluations, but also consulting services and feasibility analyses in the National Capital Region (NCR). Richard and his two partners have worked for one of the four major NCR firms and are well known in the local real estate community. And recently, Richard has just completed a preliminary evaluation of a property for Watson & Musico, which is one of NCR’s major developers and property owners. However, John Mortimer from Watson & Musico is unsatisfied with the Richard’s evaluation price, he asks Richard to raise the value, otherwise they have no business. This situation is difficult for Richard, because he wants to satisfy John’s needs, but at the same time, he can’t ignore the ethical issue to do that.


Richard Romano is a principal of CGR, and he is an Accredited Appraiser Canadian Institute (AACI) candidate. Richard has eight years of experience and is recognized as one of Canada’s leading real estate experts. He wants to complete the appraisal according to his best estimate of the current market value of the property, but he can’t afford losing business with Watson & Musico (WM) for not satisfying their needs. Success in project with WM will be a major boost to CGR, it is also Richard’s responsibility to keep his client’s interest in mind. Anyway, he wants to satisfy his client’s needs without breaking his image of profession. John Mortimer controls WM and he is well known in the NCR for his abrasive style and aggressive approach in business dealings. Because of the depressed real estate market and WM’s aggressive leasing policy, WM have a highly restricted cash flow. So WM plan to refinance all of its properties to reduce debt service requirements and to generate cash. While John feels Richard’s evaluation value for his property is underestimated, he forces Richard to raise the price. CGR is also a stakeholder because Richard’s decision is critical to CGR’s development. It aims primarily at owners of smaller properties, but smaller developers cannot provide a sufficient revenue base alone to ensure CGR’s success. As one of the NCR’s major developers and property owners, WM will bring far-reaching impact on CRG. So success in business with WM would be critical to CRG’s future. The lending institute is a stakeholder because it will take risk if appraiser’s evaluation for property is overestimated. And no matter how much an evaluation pleased a client, acceptance by a lending institution could mean the difference between success and failure. So Richard should consider the interests of lending institutions when he makes decisions. The Appraisal Institute of Canada (AIC) is a professional body which regulates the industry and serves its members. It publishes a Code of Ethics, Rules of Professional Conduct, and Standards of Professional Practice to govern appraiser’s actions. If Richard did something unethical, it would be bad for AIC’s Professional image.

Ethical Issues

Richard has responsibility to CGR and himself. Satisfying the requirements of WM could have far-reaching impact on CRG’s success and its ability to develop new clients. And he will benefit from the success too. But the problem is that Richard may engage in an unethical way to increase the value of properties from WM without considering the current market value of that. Responsibility to lending institution. The lending institution will suffer risk if Richard overestimates WM’s property. As a professional appraisal expert, Richard should be responsible for his evaluation, providing misleading information to get a higher value from bank is unethical. Responsibility to WM. WM needs to refinance its properties to reduce its debts and to generate cash. So Richard is required to raise at a...
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