2.2 The Ethics Rule: Confidentiality & 2024 Nondiscrimination Standards

2.2 The Ethics Rule: Confidentiality & 2024 Nondiscrimination Standards

Exam Tip: Appraisers owe strict confidentiality duties to their clients. You must know the five explicit exceptions where confidential information may be disclosed. Additionally, the 2024 USPAP update introduced a prominent, standalone Nondiscrimination section in the ETHICS RULE, making fair housing compliance and anti-bias standards top-priority exam material.

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The Confidentiality Section of the ETHICS RULE

The Confidentiality section of the ETHICS RULE establishes that an appraiser must protect the confidential nature of the appraiser-client relationship. Clients rely on appraisers with sensitive financial, legal, and operational property data; unauthorized disclosure breaks public trust and professional standards.

Defining Confidential Information

USPAP provides a precise definition for confidential information. It includes:

1. Information identified by the client as confidential when providing it to the appraiser, AND not available from any other source; OR
2. Information classified as confidential or private by applicable law or regulation (e.g., privacy laws like Gramm-Leach-Bliley).

Important Distinction: Information available from public records, Multiple Listing Services (MLS), land registries, or open market transactions is not confidential information under USPAP.

Protection of Assignment Results

An appraiser must not disclose assignment results to anyone other than the client and parties authorized by the client. Assignment results include the appraiser's opinions or conclusions developed specific to an assignment, such as:

• Final market value opinions;
• Highest and best use conclusions;
• Physical condition ratings or functional obsolescence estimates;
• Capitalization rate or discount rate determinations.

The Five Authorized Disclosure Exceptions

An appraiser is permitted to disclose confidential information or assignment results ONLY to the following entities:

1. The Client — The individual or entity who engages the appraiser.
2. Parties Authorized by the Client — Third parties designated in writing by the client (e.g., secondary market investors, loan guarantors).
3. State Appraiser Regulatory Agencies — State licensing and certification boards conducting compliance reviews, audits, or complaint investigations.
4. Third Parties Authorized by Due Process of Law — Lawful judicial mandates, court orders, or enforceable subpoenas.
5. Duly Authorized Professional Peer Review Committees — Ethics committees of professional appraiser organizations (except when prohibited by law).

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The 2024 USPAP Nondiscrimination Standards

In the 2024 edition of USPAP, the Appraisal Standards Board (ASB) established a standalone, expanded Nondiscrimination section within the ETHICS RULE to emphasize fair housing equity and eliminate unlawful bias from valuation practice.

Core Nondiscrimination Mandate

Under the 2024 standards, an appraiser must not act with bias or rely on unsupported conclusions in any appraisal assignment based on protected characteristics.

Prohibition on Demographic Value Factors

Appraisers are explicitly prohibited from using the demographic composition of a neighborhood, community, or market area as a factor in determining value:

• An appraiser cannot make value adjustments based on racial, ethnic, or religious demographics of neighborhood residents.
• An appraiser cannot use subjective terms, coded language, or racial proxies (e.g., describing a neighborhood as "desirable" or "undesirable" based on demographic shifts) in appraisal reports.

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Federal Fair Housing and Anti-Discrimination Laws

The 2024 USPAP Nondiscrimination section reinforces mandatory compliance with federal civil rights legislation that governs real estate transactions:

Key Federal Statutes

• Fair Housing Act of 1968 (Title VIII of the Civil Rights Act): Prohibits discrimination in residential real estate-related transactions, including appraisal services, based on race, color, religion, sex, handicap, familial status, or national origin.
• Equal Credit Opportunity Act (ECOA): Prohibits creditors and valuation providers from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.
• Civil Rights Act of 1866: Guarantees equal property rights to all citizens, granting a federal remedy against racial discrimination in property ownership, leasing, and valuation.

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Summary: Permissible vs. Impermissible Actions

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