Home Appraiser’s Manual to Evading Liability Lawsuits

As an appraiser in the real estate industry, the risk of legal actions is real. Mortgage agencies relentlessly force you for higher values, lenders are searching for scapegoats, and shady "investors" are searching for a sucker to help them commit fraud. Here are some things you have to do to handle this threat.

1.) Avoid it. Be a less attractive target.
2.) Transfer it. Transfer the liability to a different entity, such as the client or the purchaser.
3.) Control. Understand and apply the legal system to your advantage; build a connection with a capable lawyer who will help you with your business dealings to avoid beforehand any liability. Get an insurance company that is well respected to back you up.
4.) Recognition. Don’t Deny the fact that the problem is true and have yourself insured with some insurance company.
5.) Ignorance. Assume it never occurred and pray it never will.
6.) Give it up. There are other professions that have more potential than this dangerous business.
Here are a few frequent reasons a home appraiser gets involved in a complaint and litigation.

1.) Failure to determine and report improvement and site defects. If you request for a duplicate of the purchase agreement, it would be best if you can get a Seller’s Disclosure form signed. Do not forget to note that you, as the appraiser, have read and analyzed the Seller’s Disclosure Statement. Keep a duplicate of it in the work file. When the time comes to inspect the site, remember to discuss with the retailer if there have been problems about molds. The appraiser can also offer the seller with the appraiser’s own form for the seller to review, answer, and sign.

2.) Wrong estimation of the living area. Do not simply rely on data from the previous appraiser, data taken from the MLS system, county records, or details from the architect. If the appraiser obtains a set of details for planned construction, those details should be verified with sketching program to verify the size of the living area. If the appraiser waits for the final inspection to verify it is too late. If the subject has something to add to the living area, like an enclosed garage/carport or veranda, this should always be separated in the sketch and in the report – even if the area is given equal contributory value. Any changes to the living area even if the computed area remains the same should be noted separately in the report and on a separate sketch.

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

4.) Reaching a decision that the property is overvalued or undervalued. You are likely to deceive if you don’t have the required skill and E&O won’t protect you if found guilty. A study shows that approximately fifteen percent of all fraud cases deal with inexperienced appraisers.

5.) Evaluation of not the right property.

6.) Failure to check and double check, that’s it. The whole thing in the FNMA 1004 form should have been verified. Evaluations should be loaded with verification.

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

As an appraiser you cannot entirely take away the burden of liability for your evaluations rather by being conscious of and steering clear of these pitfalls you may be able to prevent any costly litigation.

Article Source: http://www.real-estate-article-directory.com

This article was written by William D. Cobb with the assistance of R Chandler Smith. William is with Accurate Valuations Group and has operated as a home appraiser for 15 years now primarily in the Greater Baton Rouge, LA area. For more information on William D. Cobb and Accurate Valuations Group, visit Baton Rouge Louisiana Real Estate Appraiser. R Chandler Smith is an acknowledged real estate authority in the Houston, TX area. He maintains Houston Real Estate Appraisal

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