Limiting Appraiser Liability to the Cost of the Appraisal?
I recently got an email from an appraiser I have high regards for. He asked me a simple question that got me thinking. It was: “Why don’t a group of appraisers get together and form an AMC?” I found that an interesting concept. It has been done. Coester was an appraiser and now he is just an AMC. Allen Hummel, an Appraisal Institute icon, has an AMC. Why not? We know it better than anyone. But the devil is in the details.
Appraiser’s liability for mistakes or omissions in this appraisal report is limited to a refund of the fee paid for this appraisal!
So I have been pondering this now for about a week. I had to testify in court. I sat outside the courtroom for 4 hours shooting the breeze with a forensic accountant. He said his contract states he is only responsible for mistakes up to his fee. I see that all the time with home inspectors. Why can’t appraisers be responsible only up to their fee? Think of the money we would save on E&O Insurance. Years ago we did not have E&O insurance. How would that impact the way lenders order appraisals? I think they would want the highest quality appraisal they could get. Because $200 to $800 would be all they could get. Oh it’s nice to dream…
39 states with AMC laws
Another state, Idaho, just enacted AMC laws. There are now 39 states with AMC laws. That is over 3/4 of the states. So, is this because Dodd Frank stated the states shall regulate the AMC’s or because of the way some of them do business? Remember when EAppraiseIT testified under oath in the Washington Mutal Bankruptcy case in New York, that they removed the signature from an appraisal, changed it, and put the signature back on it in order to make the deal work? That is the case Cuomo made his mark and resulted in the HVCC.
Non-USPAP States – Is this the END of USPAP?
Indiana became the third state to become a non USPAP state. This allows appraisers to do work that is not classified as an appraisal, like BPO’s. This system seems to be working well in Tennessee. Let’s see what happens in Indiana. Texas also passed legislation that allows alternative standards to appraisers… USPAP is no longer the only game in town!