Review appraiser liability

By attorney Todd F. Stevens

Excerpts:
Here’s a trend in real estate law: attorneys are waking up to the potential liability of review appraisers. Couple this with the common misunderstanding among review appraisers that their risk is less than the author of the original report, and you get a burgeoning new area of litigation. Here’s how to protect yourself.

Another big myth is that reviewers have less liability than the original appraiser. In fact, I have heard some attorneys argue that reviewers have more liability than the original appraiser since reviewers have the “last” opportunity to correct any problems with the report. While I am unaware of any case precedent specifically addressing this issue, logic dictates that the liability of a reviewer and the original appraiser are the same.

My comment: a topic that appraisers who review appraisals don’t like to think about. This article was written several years ago and refers to mortgage brokers, but it applies now. The author defends appraisers.

http://www.keenlaw.com/topics/reviewappraisals.html

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AMC fees – going down?

Poll Results – www.appraisalport.com  survey 11/4/13

Have you noticed any change in the fees being paid by AMC’s since the market has slowed?

– No, fees seem about the same as before. 2,618 votes 52%
– Yes, the fees seem to have increased slightly. 464 votes 9%
– Yes, the fees seem to have decreased slightly. 1,419 votes 28%
– Not sure 488 votes 9%
Total Votes: 4,989

My comment: I am forecasting declining AMCs fees because loans have dropped. Keep up with fee changes at www.appraisaladvisor.com  which is now free to all appraisers!!
I have lots of tips on getting higher AMCs in my AMC Special Report – $20 and FREE to paid subscribers!!
go to www.appraisalport.com to take the current survey.

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Where does the bulk of your appraisal work come from?

Currently, where does the bulk of your appraisal work come from?
www.appraisalport.com  poll 10-28-13

Direct mortgage lenders 1,695 votes 32%
AMC’s 3,149 votes 59%
Legal/estate work 83 votes 2%
Expert witness 26 votes 0.5%
Condemnation 27 votes 0.5%
Other 366 votes 7%

Total Votes: 5,346

My comment: 91% of residential appraisers report that most of their work comes from lenders/AMCs. This poll may be a bit skewed as appraisalport is a lender portal. But, relatively few residential appraisers do non-lender work on a regular basis. (Not just when lender work is slow.) Visit www.appraisalport.com  and vote on the current poll!!

I have been writing about getting non-lender work since 1992. You can do it, if you want. But, if you have only done lender work, it can be hard to try something new. But, it is not really that hard. I have not done lender work since 2005 and turn down work every week. Subscribe to the paid Appraisal Today Newsletter or purchase one of my Special Reports on non-lending work.

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My appraiser E&O story

I always advise appraisers to contact their E&O insurance company when they have questions. Many are worried that if they call their insurance will be cancelled. I don’t know how often this happens. Probably not very often.

I had not worried much in the past. But now, I really worry about losing my state appraiser license. I don’t need my professional designations to do appraising but I need my state license, even though I don’t do any work for lenders. If you’re not licensed, you can’t get appraisal work.

I have only called my E&O company, Liability Insurance Administrator (LIA) twice. I have been with them for over 20 years. The first time was many years ago when I took interior photos of a property occupied by an attorney who had not paid rent for a long time. The appraisal was for legal purposes. I forget the details. The attorney demanded that I return the photos and the negatives. I called and they told me what to do.

The second time was last month. I appraised a 10 unit apartment building for an estate. The executor had called me a few months previously but decided to go with an appraiser who had a significantly lower fee. She wasn’t happy with the appraisal and decided to get another one from me. She was comparing my appraisal with the other appraisal. It got very awkward for me as the other appraiser did not appear to have much experience appraising apartments. She kept calling me with questions as she was trying to reconcile the two appraisals. She was nice and not aggressive but was a math major in college and didn’t understand why there would be differences. I was getting very uncomfortable. I decided to return the fee.

I had returned fees a few times over the years because of a non-lender appraisal that got too weird (crazy people mostly). But, I wanted to be sure I did it legally correct. I called Liability Insurance Administrators and spoke immediately with one of their attorneys who sent me a form letter asking for a signed release of the appraisal and that it would not be used. The client sent back half the fee and said it was for consulting as I did help her understand about appraisals.

What’s the business lesson for me? I now know to screen out anyone who is getting a “second appraisal” because they did not “like” the other appraisal. In a strange coincidence, a few weeks ago another executor called me for the same reason. I told her I was too backed up. I had never had anything like that happen before. Always something new. Appraising would be great except for those darn clients!!

What does this mean for you? Shopping for appraisers’ E&O insurance is not like shopping for car insurance. Don’t choose it only because it is the lowest cost. It is not worth risking your license. I know that appraisers get into into awkward situations regularly when doing lender work. Who will you call?

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Appraiser Survival Plan?

What is your plan to survive this period of slowed loan originations and appraisal volumes?
9/13/13 www.appraisalport.com poll

Nothing different – I’ll be OK. 2,925 votes 51%
Rely on spouse/relatives for any shortfall. 235 votes 4%
Take on some extra work outside of appraising. 593 votes 10%
Leave the appraisal profession for a different occupation. 558 votes 10%
Not sure yet. 1,438 votes 25%

Total Votes: 5,749

My comment: Somewhat encouraging. Of course, lender work goes up and down regularly!! Could be different results in a few months. Always too much or not enough work since I started my appraisal business in 1986. I have just the right amount of work for a couple of hours or maybe a day ;>

Go to www.appraisalport.com and vote on the current poll!!

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