THE NECESSITY OF A COMMERCIAL ENGAGEMENT LETTER
A commercial engagement letter is a written agreement to perform services in exchange for compensation. Engagement letters are traditionally used by certain professional service firms, particularly in finance, accounting, law, real estate appraisal, and consulting, to define the specifics of the business relationship, or in the case of an appraisal – the assignment expectations. Once the party or parties have signed the engagement letter or indicated acceptance of an appraisal order, the letter or correspondence to an appraiser serves as a contract.
Since an engagement letter serves the same purposes as a traditional contract, it is crucial to carefully lay out the scope of the engagement, any contingencies that must be addressed, and any compliance specifics that need to be addressed in the development of an appraisal report, completion deadlines, and compensation arrangements. Ensuring that these details are correct at the beginning of the assignment helps to avoid costly and time-consuming misunderstandings later in the process. In addition, since an engagement letter is more informal than a full contract, it can be an excellent way to establish a written agreement where the parties would otherwise be reluctant to enter into a full contract.
The following are typical must-knows for an appraiser before accepting a commercial assignment:
- What is the property type? Vacant land, retail, industrial, multi-family, etc.
- What is the property location, and when is the report due?
- Who is the intended user of the appraisal report, and for what purpose is it being used?
- Who is the client and all intended users with addressees?
- What are the value scenarios being requested?
- Should the value be current, prospective, or retrospective to serve the intended purpose?
- What is interest in the property to be valued?
- Are there existing improvements? Are there any known issues about the condition of the property or improvements? Planned renovations? Proposed construction, and if so, is a Prospective Value scenario appropriate?
- Will the appraiser possibly be required to testify in court?
- What type of report is needed?
All these questions are essential and need to be answered before a mutual agreement for an appraisal assignment can be reached. The engagement letter protects both parties regarding what is required, what is expected, and the payment arrangement. Therefore, an engagement letter, or correspondence, is so necessary and required by Dart Appraisal.
Dart Appraisal makes every attempt to obtain all pertinent information for an assignment before engaging an appraiser. We are sensitive to and understand all that must be in place regarding compliance issues in all disciplines of appraisal. It is essential to utilize qualified and trained individuals for all valuations. Dart Appraisal sets clear expectations when requesting a commercial appraisal is critical to an efficient and effective appraisal process. As part of our appraisal management services, we ensure that written expectations are set forth and that only qualified appraisers are engaged for all appraisal assignments.
The standard engagement letter utilized by Dart Appraisal on behalf of our clients has evolved and is used on approximately 4,000 commercial appraisal assignments per year. Our commercial engagement letter is very comprehensive and has been successful for our clients and the appraisers.
Contact us today at 888-DART-123 or firstname.lastname@example.org.