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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  6. Now I know where the old appraisers without a tail are, I thought they just became of no value.

    • I refinanced my one beoodrm condo two years ago and had to pay for two appraisals totaling $1175. The first appraisal was done by an appraiser in WV about 60 miles away. All the sales in the appraisal were either foreclosures or short sales. There were about 35 sales at the time, 6 of which were distressed sales. He appraised my condo for $200,000. A second appraisal was ordered when I told the lender I was not going to refinance with them unless they used a local appraiser familiar with my market. I accepted to pay for the second appraisal which came in at $300,000 in line with the other sales of one beoodrm condo in the building. I called the second appraiser a few months ago to have my condo appraised again. I had a buyer interested in buying it. When he quoted his fee of $350, I assumed he was giving me a $300 discount (nice I thought). Later he told me that he only got paid $250 for the previous appraisal, that he normally charged $450 before a rule was passed making the use of AMCs mandatory and that he now gets paid between $200-250! I was outraged! What a rip off! How could this be allowed?

  7. Interesting article. I want to leave my 2 cents worth to voice my extreme displeasure at refunding fees. I gag even saying the word refund. Yes, I have had the occasional customer who asks a lot of questions, for which I am glad to answer, and of course the super achiever underwriters, who will go to the mat to argue over what a fireplace may be worth. Through it all, I would never consider a refund of any kind. What I submit is what it is, whether it is liked or not. I have developed a thick skin over the years from “arm chair appraisers” who think they can challenge an appraisal based on the “the one magic comp” they find. No – one comp does not make an appraisal – end of story – and no refund. Appraisers are a super weak breed, as professionals go. and giving refunds because of too many questions just reinforces that opinion further. Be great at what you do – be a professional – and stand up for what you said. No attorney, home owner, high priest, or anyone else is going to intimidate or pressure me in any way – because my work stands on its own merits – notwithstanding the very rare error, but that is less than 2% of the time. My work is solid – always has been, and always will be. Say what it is – support what you said – and be the best appraiser out there. Or, whimper and crawl away – your choice.

  8. I was advised by my E&O provider recently that it would be a good idea to carry insurance for years after I retire. They claimed that the FDIC can take action against you years after the appraisal was made. Have you heard anything about this? I’d hate to be sued five years into my retirement.

    • It is called “tail” coverage. Get it. It is not cheap but worth every penny. The price varies by how far back you want to go with the coverage. Do not get E&O from a company that does not offer prior acts and tail coverages. Otherwise you are wasting your money for any sort of coverage. the minimal “coverage” is lower priced. Of course, some AMCs/lenders don’t seem to know that coverage without prior acts is useless!! So, it does cover their requirements for appraisers.

      • I understand about tail coverage. What scares me is that there seems to be no time limit on our liability. As I get older and closer to the time when I might achieve my lifetime goal of running off to the circus these worries become more disconcerting,

  9. I hear from Peter Christensen, LIA attorney, that avoiding complaints is ever more challenging for appraisers, so maybe your paranoia is just plain good sense.

  10. I am in California. We have never had an appraisal board. Investigation is done with paid government employees. In the past, sometimes fee appraisers were hired for initial reviews but I never heard of any problems. No “peer review”, which can have severe conflicts. We are lucky. Before licensing, I didn’t have much to worry about. Now I want to be sure there are not problems, whenever possible. More paranoid I guess.

  11. Ann,

    It is good to know that LIA premiums give yu “an attorney on retainer.” Certainly beats asking an appriaser by a country mile. Many appraisers seem perfectly willing to give legal advice and they actually have little idea of what they are speaking nor are they licensed to practice law.

    I am curious, your post seems to imply that a complaint = loss of your license to appraise. Here in Colorado I am beginning to see a lot of careful deliberations by the State board investigators. It seems peer review may have lost its luster and the State may now be aware that many reviewers are appraisers with the power to throw a competitor under the bus.

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