Indemnity Agreements

John Pratt

John Pratt

Certified Real Estate Appraiser at Appraisal Services
Self-employed since 1999. Banking Industry for over 20 years: Real Estate Loan Officer, Commercial Loan Officer, Manager Loan Dept, Senior Loan Officer in charge of Lending. President & CEO of an Independent Bank in California. Chief Financial Officer of 2 startup firms in Silicon Valley which raised over $5,000.000 in startup venture capital. He also conducts meeting which are open to all appraisers on a monthly basis with an open format discussing anything related to the appraisal industry.
John Pratt

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Solidifi User Agreement... All Indemnity Clauses Are Not Created Equal...

Solidifi User Agreement… all Indemnity Clauses are not created equal…

This is a response to the article that Dave Towne wrote regarding Indemnity Clauses and that they are common in today’s world and appraisers better get used to it. It is also true that all Indemnity Clauses are not created equal and the devil is in the details. This topic came up because of the agreement that Solidifi requires that all appraisers that receive assignments from them must agree to. Let’s delve into the Indemnity Clause which is in that agreement. First the agreement is between Solidifi and the appraiser which is stated on page #1 in the first paragraph and therefore I assume that no other parties are a part of this agreement and the appraiser is the only one that has to agree to it and this is reinforced in section #1.

First we need to understand the definition of the terms used in the Solidifi user agreement.

Party means either Solidifi or User; and Parties means both of them. (User is the Appraiser)

Purchaser means a Person who has ordered an appraisal and which order was submitted to User by Solidifi. ( This most likely would be the lender or Mortgage broker)

User means the appraiser identified on the login screen on the Website (or any of Users employees, independent contractors, affiliates and/or agents). This would be the appraisers.

The following is copied from the Solidifi user agreement: (wherever you see “User” insert the word Appraiser)

(b) USER INDEMNITY: User, at User’s expense, shall defend, indemnify and hold harmless Solidifi, its affiliates, the Purchaser and their respective directors, officers, employees, agents and subcontractors, from and against any Claim brought against them to the extent such Claim:

  • (i) alleges, directly or indirectly that any User Content or other documentation, information or material provided by User to Solidifi infringes the Intellectual Property Rights of any third Person;
  • (ii) relates to or is in respect of the appraisal(s) submitted by User and such Claim alleges that User performed or prepared the appraisal(s) negligently
  • (iii) in relation to the injury or death of any Person, damage to or destruction of any property sustained by any Person caused by any act or omission on User’s part; or (iv) is in relation to User’s use of the Services, except to the extent as Solidifi has indemnified User pursuant to Section 11(a).

Solidifi shall provide User with:

  • (i) prompt written notice of the Claim or of any allegations or circumstances known to Solidifi which could result in a Claim;
  • (ii) all reasonable information and assistance from Solidifi, at User’s expense, which User may require to defend the Claim; and
  • (iii) sole control of the defense of the Claim, and all negotiations for the settlement or compromise thereof.

(c) EXCEPTIONS: One or more of User’s indemnities set out in Section 5(f) or 11(b) may not be permissible under law in certain jurisdictions and therefore, one or more of User’s indemnities set out in Section 5(f)or 11(b) may not apply to User.

Let’s dissect what this Indemnity really says. Remember the definition, User = appraiser, Purchaser = Lender, Parties = Appraisers and Solidifi.

My reading of this is that the appraiser at his/her expense must “hold harmless” and defend Solidifi, purchaser (lender) and a host of others which the appraiser doesn’t even know, against all claims that alleges that any appraisal content or other documentation etc. provided by the appraiser to Solidifi etc. and such Claim alleges that appraiser performed or prepared the appraisal(s) negligently etc. This could be an allegation by the buyer, seller, agent or anyone else and the appraiser would have to pay for the defense of these allegations regardless if the appraisal was or was not deficient in any way.

Earlier in the Solidifi user agreement it stated that the agreement is governed by the laws of the State of New York… I live and work in the state of California, all properties that I appraise are in the state of California. California courts have rendered decisions that buyers, sellers, agents and other parties which are the not the client of the appraiser can not bring lawsuits against the appraiser regarding errors and/or deficiencies in the appraisal report. This was upheld by the appellate court on appeal. Earlier in the Solidifi user agreement it stated that the agreement is governed by the laws of the State of New York. Why would any appraiser in the State of California give up the right to be protected by case law which protects the appraiser from lawsuits of non-clients of the appraiser?

If the lender feels the need for some kind of agreement between them and the appraiser then they should put this in writing to the appraisers.

AMCs are an agent of the lender to find an appraiser and procure an appraisal report and act as a conduit to transport the completed appraisal report to the lender. They are not the client or the intended user of the report.

John Pratt

John Pratt

Self-employed since 1999. Banking Industry for over 20 years: Real Estate Loan Officer, Commercial Loan Officer, Manager Loan Dept, Senior Loan Officer in charge of Lending. President & CEO of an Independent Bank in California. Chief Financial Officer of 2 startup firms in Silicon Valley which raised over $5,000.000 in startup venture capital. He also conducts meeting which are open to all appraisers on a monthly basis with an open format discussing anything related to the appraisal industry.

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5 Responses

  1. Tom Markoski on Facebook Tom Markoski on Facebook says:

    Towne is wrong. This is a unilateral (my way or highway) contract. Only suckers would sign up for that.

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  2. marion says:

    (i) alleges, directly or indirectly that any User Content or other documentation, information or material provided by User to Solidifi infringes the Intellectual Property Rights of any third Person;

    (ii) relates to or is in respect of the appraisal(s) submitted by User and such Claim alleges that User performed or prepared the appraisal(s) negligently

    Hey,

    It lets them use your appraisal for AVMs and they are not responsible. Better hope the other data included with yours was correct data. Should a borrower feel they have been harmed by a faulty AVM, or hybrid, or similar crap product, and Solidify is sued, you are indemnifying them for using your report and it’s data and photos. And I believe the AMC Final Rule and most states that register AMCs require AMCs to ensure their reports comply with USPAP requirements, so if you screwed up your report, and the AMC does not catch it, as part of their “QC”, they can not be held accountable, because you are indemnifying that also.

    ROFLMAO.

    And these agreements are 19 pages while the USPAP for standards 1 and 2 are less than that.

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    • Baggins Baggins says:

      Marion, I picked this up a long time ago and just ran with it. In your opinion, will it hold up?

      The appraiser does not guarantee or imply any compensation for liability or other expenses incurred by any parties. The appraiser does not guarantee or indemnify the service or costs incurred of or by any other party. By using this appraisal report, all interested parties current and possibly in the future, acknowledge that this reports function is limited to assisting ‘the client’ in making informed lending decisions, and acknowledge the appraiser and his professional associates, does not indemnify, guarantee, or agree to pay any other parties services or incurred costs, for any reason.

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Indemnity Agreements

by John Pratt time to read: 3 min
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