Engagement Letter

Last Updated: Jun 7, 2019

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An engagement letter is a legal document that defines the engagement between the appraiser and the borrower. This letter should state the terms and conditions of the engagement, address the scope of the assignment and the terms of compensation. In a nutshell, you want your borrower to be in agreement about what is planned and expected in your appraisal report and how and when the borrower will be paid.

Engagement letters are also used by lenders when retaining an appraiser to value collateral (typically machinery & equipment, real estate, or inventory) as part of a lender's due diligence before closing on a loan. When a lender engages an appraiser the borrower, or prospective borrower, has little or no involvement in determining the scope of the appraisal to be performed. Engagement letters also outline the circumstances under which and appraiser can be held responsible for mistakes or errors contained in the appraisal report.