Posts tagged E&O
On December 2, 2013, three law firms in Florida, Washington and Colorado teamed together to file a class action complaint on behalf of real estate agents and others allegedly owed unpaid fees for broker price opinions ordered by BrokerPriceOpinion.com. The complaint also names three-related companies First Valuation, LLC, First Valuation Services, LLC, and First Valuation Technology, LLC as defendants on the basis that they are “alter egos” of BrokerPriceOpinion.com and do not have true corporate separateness in their operation. The lawsuit was filed in federal court in Colorado, where the defendants are based.
The named plaintiff in the lawsuit is Kathy Wornicki, a Florida real estate agent, who alleges that she is owed $880 for 29 (more…)
First, it is gratifying to know you are actually reading what we write and release. We know this is true because a little over a year ago, we received very few questions about subpoenas and today, after writing a little warning piece on the now infamous FDIC subpoenas being issued to appraisers by a private law firm, we get lots of questions. In fact, we get so many we decided to put together a short follow-up piece on different kinds of subpoenas and how to handle them. These are presented in ascending order of concern with the final one being the most dangerous. All are court orders and none of them can simply be ignored…unless you also want to learn about motions to compel and sanctions.
1. Fact witness subpoenas (aka subpoena ad testificandum):
This subpoena is issued to request you to appear as a fact witness at either a deposition or a trial. As long as you are only being asked to deliver testimony about factual issues, there is no reason to get your (more…)
Last Thursday, November 14, Navigators Insurance Company sued two more appraisers to enforce “regulatory claims” exclusions in the E&O policies they purchased. These appraisers are in Nevada. Like the appraiser sued by Navigators in Florida on November 6, the Nevada appraisers are being sued by the FDIC for professional negligence in cases filed about a year ago. The objective of Navigators’ lawsuits is to seek court confirmation of Navigators’ legal position that there is no coverage under Navigators’ policy for damages awarded against the appraisers to the FDIC, which is demanding about $500,000 from each appraiser, or any coverage for attorneys’ fees and costs to defend the cases beyond $100,000. The FDIC’s lawsuits against the Nevada appraisers are both scheduled to be ready for trial in December; as a result, the appraisers now each have two lawsuits they must defend: the FDIC’s case and Navigators’ case regarding the insurance coverage. One of the latest lawsuits can be found at this link on www.appraiserlaw.com. Accompanying the lawsuit as an exhibit is the appraiser’s E&O policy from the Navigators program with the exclusion.
Navigators’ lawsuits to deny the appraisers coverage again relate to (more…)
“I was just asked by an AMC to get a background check. Do I have to comply?”
As risk management advisors for Appraisers and Inspectors, this is one of the questions we hear over and over again.
Let’s face it — appraisal fees are lower than ever before. Essentially, AMCs are asking you to do the same amount of work for less pay. In some cases, they’re even asking you to do more work. Does it make sense then that you have to get a background check in order to work for a specific AMC?
Unfortunately, the increased costs associated with getting a background check are not the only problem Appraisers face. Other concerns include identity theft, hassle, and fees that are simply unfair.
- Identity Theft - Think about the information included in your background check — your name, address, date of birth, social security number — precisely the information needed for identity theft. The AMC, banks, loan officers and others will have access to this information. If that doesn’t scare you, (more…)
On September 5, 2013, in a professional negligence case against two Colorado appraisers by the FDIC, a federal court ruled on an issue concerning USPAP confidentiality. It was a simple issue, but it’s one of the very few court decisions relating to USPAP’s poorly written confidentiality rule (this previous post here explains why the rule is poorly written). This is the rule:
An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: the client; persons specifically authorized by the client; state appraiser regulatory agencies; third parties as may be authorized by due process of law; or a duly authorized professional peer review committee …
The question for the court was: in response to a discovery demand in the case, did one of the defendant appraisers have to handover appraisals of the same property that were for different clients and unrelated to the loan at issue despite the confidentiality rule in USPAP? The court’s answer was (more…)
I recently read a summary of an interview of James Gorman, CEO of Morgan Stanley. When Gorman was asked about the chances of another financial crisis like the one we had 5 years ago occurring, he replied that “the probability of it happening again in our lifetime is as close to zero as I could imagine”. To this statement, my reply is quite simply “bull—-!”
Here are the reasons why another financial crisis can happen in the next few years.
1. Government and personal debt remain at unsustainable levels.
2. The US budget is still not balanced.
3. Due to 1 & 2, interest rates must go up. (more…)
Current AMC Bond Requirements
Are AMC Bonds Working?
Many appraisers don’t know about or don’t understand the new FDIC and “regulatory agency” exclusions found in many appraiser E&O policies. Why is it relevant to know if your policy has an FDIC or regulatory agency exclusion of some sort? The main reason is because the FDIC sues appraisers for professional negligence — such lawsuits are discussed in prior posts: here and here.
How do you determine if a policy being offered to you contains an FDIC exclusion? First, no policy sold by LIA in its appraiser E&O program contains any FDIC or similar regulatory agency exclusion. If you are not purchasing E&O insurance in LIA’s program, what you need to look for are the common exclusions shown below. When they apply to a policy, these exclusions are usually added as endorsements, typically at the end of an appraiser’s policy.
Navigators Insurance Company
The following exclusion is applied as an endorsement to (more…)
We often receive calls from appraisers who have been blacklisted by a lender they do no direct appraisal work for. Typically, the story is the same. They are being dropped from an AMC panel that has given them a lot of business because the AMC found out one of the bigger secondary market loan buyers/lenders has blacklisted the appraiser. This is a lender they do not work for and/or haven’t done any work for in years. The blacklisting is based on some alleged issue with an appraisal done for another client and usually involves a review of the old appraisal by staff from the lender issuing the blacklist notice. Because the AMC fears a new appraisal done today for any lender might someday end up being sold to the lender that issued the blacklist, the AMC just drops the appraiser to avoid the potential problem.
Many times the alleged appraisal (more…)
Why You Should Keep Your Workfile for 7 to 8 Years
In 2013, many lawsuits against both residential and commercial appraisers continue to relate to appraisals performed years ago at the peak of the real estate price bubble, 2005 to mid-2008. These lawsuits are filed by borrowers, lenders, investors or the FDIC and typically allege that an appraiser’s inflated value resulted in the plaintiff borrowing, paying or loaning too much money. The plaintiff blames its loss on the appraiser and sues for damages.
When reporting a claim like this to our office, one of the most common questions a defendant appraiser will ask us is about the applicable statute of limitations. The question is usually something like: “I did the appraisal in 2005, more than five years ago. I threw out the workfile because USPAP only requires me to keep files for five years. Won’t the lawsuit be dismissed based on the statute of limitations?” The answer to that question is almost always “probably not.”
The purpose of this Claim Alert is to clear up misconceptions that appraisers read and hear regarding statutes of limitations and to advise appraisers about the importance of retaining workfiles well beyond USPAP’s bare minimum recordkeeping requirement. A good workfile is the appraiser’s defense tool kit when a claim comes in. Without that workfile in hand, the appraiser’s defense counsel will usually be hampered in his or her ability to defend a claim. Our advice on this issue is simple: keep your workfile for seven to eight years (unless a longer period is required under USPAP’s special requirement for assignments where the appraiser has provided testimony). The discussion that follows should help you understand why. (more…)
According to the Appraisal Institute’s recently published 2013 Real Estate Appraisal Outlook, U.S. appraisers anticipate that litigation valuation/forensic appraisals will be one of the top five areas of growth in the next one to two years in both commercial and residential appraisal. Indeed, approximately 33% of surveyed commercial appraisers anticipate more demand from law firms and lawyers in the near future, with 24% of those surveyed expecting an increase in valuation consultation and studies in support of litigation. The appraisers’ prediction may be spot on the money as at least one U.S. municipality has begun to implement a plan to seize hundreds of underwater mortgages through its power of eminent domain, potentially paving the way for a steady demand of litigation-related appraisals.
At the end of July 2013, Richmond, California became the first city in the country to proceed with a plan to write down the value of underwater mortgages, transferring most of the value (more…)
With appraisers being asked to do more work for the same amount of money and with lawsuits against appraisers being more prevalent today than ever before, it is increasingly important for real estate appraisers to check and double check the data they use when preparing a report. Since many appraisers are still feeling the economic impact of the real estate downturn on their bottom line, more and more are looking to reduce the cost of the data they use. While this may seem to be a simple and sound economic decision, it can lead to some serious negative consequences.
USPAP infers that an appraiser is to use (more…)
In the last several years, we have seen more negligence claims relating to appraisals performed for tax purposes, especially appraisals for conservation easements, charitable deductions, and estate or gift tax. The IRS is particularly focused at this time on scrutinizing appraisals of conservation and preservation easements submitted for the purpose of substantiating a charitable deduction by the property owner/tax payer. Here, the property owner is generally proposing to record an easement over his property to protect a natural aspect or preserve historic features like a building facade. The easement typically will be donated to and held by a charitable organization, such as a land trust or historic preservation trust, or by a government agency. The appraisal will then be used by the property owner to claim a charitable deduction or other tax incentive. The owner obviously will hope for a valuation that maximizes these benefits.
Most appraisers who perform appraisals of conservation and preservation easements are aware of the penalties (more…)
As a risk management firm which has been serving real estate appraisers for over 20 years, we are in a relatively unique position in terms of offering suggestions how to improve the current residential real estate appraisal process. To offer some perspective, during our history we have had close to 20,000 appraisers as members of our risk management family and we have been actively involved in the resolution of close to 2000 claims brought against appraisers, both inside and outside of the courtroom. Furthermore, our management team has been around long enough to witness not only the most recent collapse of the real estate market, but also the all of the previous collapses dating back to the 1970’s.
Here are a few proposals to improve the integrity of the appraisal process while protecting appraisers from open-ended exposure to liability and an unfair, unlevel playing field: (more…)
I find myself offering thoughts about many strange and unusual situations involving appraiser E&O and risk management in general, but today may be the strangest subject of all – why it appears Chase did nothing wrong in the ESA bankruptcy case.
Don’t misunderstand this as meaning I like Chase in the slightest. I strongly disapprove of what Chase has done and continues to do to appraisers using blacklisting, strong-arming, and filing state licensing complaints to force its will on the appraisal profession. I find much of what Chase has done as both a lender and loan servicer to be repugnant and highly unprofessional, but in the ESA case the simple fact is Chase is not the culprit. There is no question the ESA bankruptcy filing has left many appraisers high and dry and it appears millions of dollars may have disappeared, but calling on Chase to pay these losses ignores the fact that Chase was also victimized by ESA.
To put it simply, imagine Chase is the owner of a (more…)