Appraisal engagement letter: the assignment terms, in writing before the inspection
By Arthur Teboul, DokuTrak · Published
In brief
An appraisal engagement letter fixes the assignment before any work starts: who the client and intended users are, what the appraisal will be used for, which value is sought and as of what date, and the assumptions it rests on. It also sets the fee, the report due date and the records the owner must provide.
The template: Appraisal engagement letter
Fill one clause per assignment element, keep the lender rider only for a loan, and the tax clause only for a gift or estate appraisal. Check each clause against the current appraisal standards and your state board rules.
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[Appraisal firm name] [Appraiser name], [credential], [state] license or certification no. [number] [Date] [Client name] [Client address] Re: Appraisal of [property address]
Dear [Client contact name],
Client and intended users
You, [client name], are our client for this assignment. The intended users of the report are [client name] and [other named users]. No other person may rely on the report, including a borrower or owner who receives a copy.
Intended use
The appraisal is to be used only for [intended use, for example a lending choice on a first mortgage / the estate tax return of (name) / a charitable gift deduction / settlement of a marital estate]. It is not valid for any other use.
Property and rights appraised
Subject property: [address], [legal description or parcel number], a [property type]. We will appraise the [fee simple / leased fee / leasehold] interest. Personal property, business value and other intangibles are [excluded / included as follows: (list)].
Type of value and effective date
We will develop an opinion of [market value / other type of value], as defined in [definition and its source], as of [the date of our inspection / (retrospective date) / (prospective date) on completion].
Assumptions and conditions
This assignment relies on the following extraordinary assumptions: [list]. It uses the following hypothetical conditions: [list, or none]. If any of them proves untrue, the opinion of value may change.
Scope of work
We will make an [interior and exterior / exterior only / desktop] inspection on [date], research the market from [data sources], and consider the [sales comparison / cost / income] approaches. If we find that an approach does not apply, the report will say why.
Report
We will deliver an [Appraisal Report / Restricted Appraisal Report] in [narrative / form] format by [due date], provided we have received the items listed below. Revisions requested after delivery that do not stem from our error are billed at [rate] per hour.
Records and access
By [date], please provide: rent roll; current leases; operating statements for [years] and the current year to date; the latest property tax bill; plans and permits; a list of recent capital work; and any prior appraisals. Please arrange access to every part of the property on [inspection date]. Late items move the report date by the same number of days.
Lender rider(optional)
Our fee does not depend on whether the loan closes. You agree not to communicate a desired value or a predetermined threshold. We will deliver the report to you, and you will provide the borrower’s copy under the rules that apply to you.
Charitable gift or estate use(optional)
For a charitable gift, we will prepare a qualified appraisal, signed no earlier than the period the regulations allow before the date of the gift, and our fee is not based on the appraised value. For an estate, the effective date is the date of death or the alternate valuation date you choose.
Fee
Our fee is [amount], with [amount] due on signing and the balance on delivery. Our fee does not depend on the value we report, on reaching any stated value, or on any result that follows from the report. Testimony, depositions and court preparation are not included and are billed at [rate] per hour if needed.
Prior services
We have [not performed any services / performed the following services] regarding this property, as an appraiser or in any other capacity, within the three years before this assignment: [describe, or none].
Workfile
We will keep a workfile for this assignment for at least [retention period] after the report is delivered, or longer if a legal proceeding requires it, and make it available as our professional standards and the law require.
Confidentiality
We will not disclose the results of this appraisal or your confidential information to anyone other than you and the intended users, except as our professional standards or the law require.
Cancellation
If you cancel before delivery, you will pay for work done to the date of cancellation at [rate] per hour, up to the full fee.
Liability and disputes(optional)
Our total liability for any claim about this assignment is limited to [the fee paid / (amount)], except where the law does not allow such a limit. This letter is governed by the laws of [state], and any dispute will first go to non-binding mediation in [city, state].
Authorization
Please sign below to confirm the assignment terms above. We will schedule the inspection once we receive the signed letter and the deposit.
Respectfully, [Appraiser name], [credential] [Appraisal firm name] Signature: ____________________ Date: __________ Engaged by [Client name]: [Signer name], [Title] Signature: ____________________ Date: __________
The assignment elements, one clause each
An appraisal answers a narrow question: what is this property worth, to whom, for what purpose, on what date. Change any part and the answer changes. The letter is where both sides agree on that question before the inspection, not after a number they dislike.
Write one clause for each element in the table. The main appraisal standards in the United States are the Uniform Standards of Professional Appraisal Practice, or USPAP. Federal tax rules, for example, define generally accepted appraisal standards as the substance and principles of those standards (26 CFR 1.170A-17, Qualified appraisal and qualified appraiser).
| Element | What the letter states | Example |
|---|---|---|
| Client | The party that engages the appraiser | The lender, not the borrower |
| Intended users | Every party that may rely on the report, by name | The lender and its successors |
| Intended use | The single purpose of the appraisal | A lending choice, an estate return, a divorce |
| Type of value | Which value and its definition | Market value, liquidation value |
| Property rights | The interest appraised | Fee simple, leased fee, leasehold |
| Effective date | The date the value applies to | Current, date of death, as-complete |
| Assignment conditions | Assumptions the result depends on | Plans as drawn are built as drawn |
Who the client is when a lender orders
In a mortgage, the client is the party that hires the appraiser, which is the lender or the management company acting for it, not the borrower who pays the fee at closing. The letter should say so, and say that a borrower who receives a copy is not an intended user.
Federal rules also limit what a lender may put in the letter for a consumer’s home. No one in the transaction may try to make the value rest on anything other than the appraiser’s independent judgment (12 CFR 1026.42, Valuation independence (Regulation Z)). Seeking a minimum or maximum value is one example the rule lists, and so is tying the appraiser’s pay to the loan closing (12 CFR 1026.42, Valuation independence (Regulation Z)).
Whether a licensed or certified appraiser is required depends on the transaction. For banks regulated by the OCC, a residential transaction of $400,000 or less and a commercial one of $500,000 or less need no certified or licensed appraiser (12 CFR 34.43, Appraisals required (OCC)). The bank must still obtain an evaluation consistent with safe and sound banking practices (12 CFR 34.43, Appraisals required (OCC)). A federally related transaction of $1,000,000 or more needs a state certified appraiser (12 CFR 34.43, Appraisals required (OCC)).
Extraordinary assumptions and hypothetical conditions
Two kinds of assumption change how far a reader can trust the number. An extraordinary assumption is something the appraiser treats as true for this assignment but cannot confirm, such as an environmental report not yet received. A hypothetical condition is something known to be false that the appraiser assumes anyway, for example valuing a building as finished while it is still under construction.
Put both in the letter by name, with a sentence that the value may differ if they turn out wrong. A client who sees “as complete, per plans dated [date]” in the signed letter cannot later claim the value described the property as it stands.
When the appraisal supports a tax return
Charitable gifts of property bring their own rules. A qualified appraisal is an appraisal document prepared by a qualified appraiser under generally accepted appraisal standards, as the tax regulations define it (26 CFR 1.170A-17, Qualified appraisal and qualified appraiser). It must be signed and dated no earlier than 60 days before the date of the gift (26 CFR 1.170A-17, Qualified appraisal and qualified appraiser).
The fee clause matters here. The fee for a qualified appraisal cannot be based to any extent on the appraised value, and a fee that depends on the value the IRS later allows counts as based on value (26 CFR 1.170A-17, Qualified appraisal and qualified appraiser). Write a flat fee or an hourly rate, and state the effective date of value as the date of the gift.
The records and access the owner owes you
Income property appraisals stall on missing records. List them in the letter with a due date before the inspection, and say the report date moves if they arrive late.
- Current rent roll, with tenant names, unit sizes, rents and lease end dates.
- Copies of current leases and any amendments or side letters.
- Operating statements for the last three years and the current year to date.
- The latest property tax bill and any pending appeal.
- Building plans, permits and a list of recent capital work with costs.
- Prior appraisals, surveys and environmental reports, if any.
- A contact and two possible dates for the inspection, with access to every unit.
Questions people ask
What is an appraisal engagement letter?
It is the written agreement between an appraiser and the client that sets the assignment: client, intended users, intended use, type of value, effective date, assumptions, scope of the inspection, report type, fee and due date.
Who is the client when a lender orders an appraisal?
The lender, or the management company that orders for it. The borrower may pay the fee and receive a copy, but is not the client and, unless named, is not an intended user.
Can a lender tell the appraiser the value it needs?
Not for a consumer’s principal dwelling. Federal rules bar seeking a minimum or maximum value and conditioning the appraiser’s pay on the loan closing (12 CFR 1026.42, Valuation independence (Regulation Z)).
Can an appraisal fee be a percentage of the value?
For a charitable gift appraisal, no: the fee cannot be based to any extent on the appraised value (26 CFR 1.170A-17, Qualified appraisal and qualified appraiser). A flat fee or an hourly rate for every assignment avoids the question.
Sources
- 12 CFR 1026.42, Valuation independence (Regulation Z): No covered person may cause a home’s value to rest on anything other than the appraiser’s independent judgment; examples include seeking a minimum or maximum value and conditioning pay on the loan closing.
- 12 CFR 34.43, Appraisals required (OCC): Residential transactions of $400,000 or less and commercial ones of $500,000 or less need no certified or licensed appraiser but still need an evaluation; federally related transactions of $1,000,000 or more need a state certified appraiser.
- 26 CFR 1.170A-17, Qualified appraisal and qualified appraiser: A qualified appraisal follows the substance of USPAP, is signed no earlier than 60 days before the gift, and its fee cannot be based on the appraised value.
About the author
Arthur Teboul (Founder, DokuTrak) is building DokuTrak after watching professionals lose hours chasing clients for documents over email. Arthur Teboul.
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How this page was made (methodology): it is built from the primary sources listed under Sources, and every rule and figure on it links to the source it comes from. Last updated October 25, 2026. Spotted an error or a rule that changed? Contact us.
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