Real Estate Appraiser’s Guide to Avoiding Liability Lawsuits

The likelyhood of a litigation is real when you’re a real estate appraiser. credit agencies relentlessly pressure you for higher values, lenders are looking for scapegoats, and infamous "investors" are looking for a sucker to help them commit mortgage fraud. Here are a few ways you need to do so as to manage this threat.

1.) Evade it. Don’t do anything that can make you a liable target.
2.) Shift. Shift the problem to somebody else, such as the customer or the other intended users.
3.) . The justice system is your friend; employ it to your advantage. Get an insurance company that is highly regarded to support you.
4.) Acceptance. Admit the fact that the problem exists and insure against it, such as with errors and omissions insurance.
5.) Ignorance. Assume it never occurred and pray it never will.
6.) Throw in the towel. There are more promising careers than this uncertain business.
The most common reasons for home appraiser complaints and litigation are:

1.) Not able to observe and tell somebody of any development and irregularity. When you want to request for a copy of the purchase agreement, it is best if you can get the Seller’s Disclosure form signed. Add a statement to the appraisal that indicates that the appraiser has examined the Seller’s Disclosure Statement. Ensure that you obtain a copy of the Seller’s Disclosure Statement. At the time of inspection, ask the broker if they are aware of any mold problems. When the check up is finished, the seller can review, answer, and sign the appraiser’s form.

2.) Incorrect computation of gross living area. When on an assignment, the appraiser should not depend upon what’s in the MLS system for living area, the previous appraiser’s drawing, an old survey, and the county records pointing out the living area or the set of plans from the architect. Any construction plans of the living area should be confirmed using a sketching software. It would be too late if you will wait for the data obtained after the last examination. If the subject has an addition to the living area, such as an enclosed carport/garage or porch, this area should at all times be separated in the sketch and in the report – even though the area is given equal contributory value. All modifications to the living area even though the calculated area is still the same should be indicated separately in the report and on a separate sketch.

3.) Failure to report leakage of the roof, foundation cracks, basements that are wet, termite infestation and mechanical defects.

4.) Reaching a decision that the property is overvalued or undervalued. You are likely to cheat if you don’t have the required skill and E&O won’t protect you if found guilty. Appraisers who aren’t experienced with their duties and responsibilities are likely to be convicted with fraud.

5.) Appraisal of incorrect real estate.

6.) You didn’t confirm. Consists of 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, subject’s history (both sales and listing), etc… Confirmation should be the primary job during an appraisal.

7.) Insult. A review appraiser can be sued once he or she defames the appraiser rather than the report.

As an appraiser you cannot fully get rid of the burden of liability for your appraisals but by being conscious of and avoiding these pitfalls you may be able to prevent any expensive litigation.

This article was written by Bill Cobb with the assistance of R. Chandler Smith. Bill owns and operates Accurate Valuations Group and has performed as a real estate appraiser for 15 years now primarily in the Greater Baton Rouge, LA market area. For more information on Bill Cobb and Accurate Valuations Group, visit Baton Rouge, LA House. R. Chandler Smith is a talented real estate expert in the Houston and Austin area. He oversees Houston Appraisals

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