How to Evade Liability Lawsuits as a Real Estate Appraiser

By: R Chandler Smith


As an evaluator in the real estate world, the danger of lawsuits is real. credit agencies relentlessly pressure you for higher values, lenders are looking for fall guys, and notorious "investors" are looking for a sucker to help them commit mortgage fraud. Here are a few methods you have to do so as to manage this threat.

1.) Avoid it. Donít do something that can turn you into a liable mark.
2.) Transfer it. Move the problem to a different entity, such as the customer or the other intended users.
3.) . The justice system is your friend; employ it to your advantage. Have an insurance company like Errors and Omissions Insurance from a reputable company that will defend you with local lawyers.
4.) Accept it. Admit that the problem is real and insure against it, such as with an errors and omissions insurance.
5.) Ignore it. Imagine it does not exist and wish it goes away.
6.) Leave it. Change your profession to one that is less adversarial.
The most common reasons for real estate appraiser complaints and legal actions are:

1.) Failure to discover and report improvement and site defects. If you request for a duplicate of the purchase agreement, it is best if you can get a Sellerís Disclosure form signed. Include a statement to the evaluation that shows that the evaluator has examined the Sellerís Disclosure Statement. Secure a duplicate of it in your work file. When the time comes to check the house, remember to discuss with the seller if there are issues regarding molds. Once the check up is finished, the seller can review, answer, and sign the appraiserís form.

2.) Wrong estimation of the living area. When on an assignment, the evaluator should never rely upon what is in the multiple listing system for living area, the previous evaluatorís sketch, an old inspection, and the county records pointing out the living area or the architectís set of plans. If the appraiser obtains a set of details for planned construction, those details should be confirmed with sketching software to verify the living area size. It will be too late if youíll wait for the information obtained after the final inspection. If the subject has an addition to the living area, such as an enclosed garage/carport or veranda, this area should always be separated in the sketch and in the report Ė even though the area is given the same contributory value. All modifications to the living area even though the calculated area remains 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, infestation of termites and mechanical failure.

4.) Overvaluation or Undervaluation of a property. Youíre likely to deceive if you do not have the needed skill and E&O will not protect you if found guilty. A study stated that approx. 15% of all fraud cases deal with appraisers who have little or no experience.

5.) Youíre appraising the wrong estate.

6.) You didnít verify. Everything in the FNMA 1004 form shouldíve been confirmed. Confirmation should be the chief duty during an appraisal.

7.) Insult. The review appraiser degrading the appraiser rather than the report itself, therefore the appraiser defamed files a lawsuit against the review appraiser.

As an appraiser you cannot fully get rid of the weight of liability for your appraisals rather by being conscious of and avoiding these drawbacks you may be able to avert any expensive litigation.

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This article was written by Bill Cobb with the assistance of Chandler Smith. Mr. Cobb heads Accurate Valuations Group and has been licensed as a house appraiser for 15 years now primarily in the Greater Baton Rouge, Louisiana market area. For more information on Bill Cobb and Accurate Valuations Group, visit Baton Rouge Louisiana Appraiser. Chandler Smith is a talented real estate expert in the Houston Texas area. He runs Houston Real Estate Appraiser

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