The possibility of a litigation is real if you’re a real estate appraiser. Mortgage agencies relentlessly pressure you for higher values, lenders are searching for simpletons, and notorious "investors" are searching for easy target to help them carry out fraud. Here are some methods you need to do in order to manage this threat.
1.) Avoid it. Be a less attractive mark.
2.) Shift. Transfer the weight to something else like the client or somebody else.
3.) Be in charge. Know and apply the legal system to your advantage; build a connection with a proficient lawyer who can help you with your dealings to pre-avoid liability. Have an insurance company like Errors and Omissions Insurance from a reputable company that will support you with local contract attorneys.
4.) Accept it. Declare that the problem exists and insure against it, like with an E & O insurance.
5.) Ignore it. Pretend it is not real and wish it disappears.
6.) Leave it. Change your career to one that is less adversarial.
The most familiar reasons for home appraiser lawsuits and litigation are:
1.) Failing to discover and declare improvement and site flaws. When you request for a duplicate of the purchase agreement, it is best if you can get the signed copy of the Seller’s Disclosure form. Include a statement to the appraisal that shows that the appraiser has reviewed the Seller’s Disclosure Statement. Secure a duplicate of it in a work file. When it is time to inspect the place, remember to discuss with the retailer if there are issues regarding molds. The appraiser can also present the seller with the appraiser’s own form with questions for the seller to evaluate, answer, and sign.
2.) Miscalculation of the living area. While performing an assignment, the appraiser should not depend on what is in the MLS system for living area, the former appraiser’s sketch, an old survey, and the county records pointing out the living area or the architect’s set of plans. Any construction plans of the living area should be confirmed using a sketching software. If the appraiser waits for the final inspection to verify it’s will be too late. If the subject has something to add to the living area, like an enclosed veranda or garage/carport, this area should always be separated in the sketch and in the report – even if the area is given the same contributory value. All modifications to the living area even though the computed area is still the same should be indicated separately in the report and on a separate sketch.
3.) Did not note in the report that there’s leakage of the roof, basements that are wet, cracks in the foundation, infestation of termites, and minor or major mechanical failure.
4.) Making a decision in which the property’s value is increased or decreased. Fraud is at times an issue of competency and E&O Insurance doesn’t cover the appraiser when fraud is found. Appraisers who are inexperienced with their duties and responsibilities are prone to be convicted with fraud.
5.) Appraisal of incorrect property.
6.) Failure to verify, that’s it. Includes items throughout the 1004 form of the Federal National Mortgage Association such as utility hookups, zoning, dimensions of the lot, County taxes, correct owner of record, history of the subject (both listing and sales), etc… Confirmation should be the primary duty when doing an appraisal.
7.) Defamation. A review appraiser can be sued if he or she insults the appraiser rather than the report.
As a real estate appraiser, you can avert any litigation if you’re aware of the pitfalls regarding your appraisal and steer clear of them as much as possible.
This article was written by William D. Cobb with the assistance of Chandler Smith. Mr. Cobb owns and operates Accurate Valuations Group and has operated as a house appraiser for 15 years now primarily in the Greater Baton Rouge, LA market. For more information on William D. Cobb and Accurate Valuations Group, visit Baton Rouge House. Chandler Smith is a young and bright real estate professional in the Houston Texas area. He runs Houston Real Estate Appraiser
