Court Evidence & Your Workfile
How a Few Key Items in your Work File Can Protect You in Court
I used to work with someone who had a photographic memory. Most of us are not so lucky, and have to rely on our imperfect memories and good note-taking skills. As an attorney, I document everything. I handle hundreds of cases, and without good documentation I will not remember what I did on a particular day or what support I had for a particular theory.
As an appraiser, your work file is your documentation. Not only is a work file a USPAP requirement1, it can help if you ever have to go to court. An appraiser could end up in court by volunteering to be an expert witness, by being pulled into a case by parties relying on his appraisal, or by being subject to a disciplinary proceeding or civil suit. Litigation can pop up years after you’ve done an appraisal, due to different statutes of limitations2. This is where a good work file will help you; not only is it a memory aid, but it can also serve as evidence to the court that your findings are supported.
This article is not meant to be an exhaustive list of all the items that need to be in a work file. Rather, the purpose of this article is to highlight how a few key things in your work file can protect and help you should you ever have to be in court.
Copy of the Report:
I work as an attorney in the Florida Department of Business and Professional Regulation, Division of Real Estate, where I handle complaints against appraisers. I normally receive the work file on the appraisal at issue. On more than one occasion, I’ve received a copy of an appraisal report, only to have the appraiser claim that that is not the version that they did. USPAP contains rules on protecting one’s signature. However, it is not unheard of for someone’s signature to be stolen or appropriated. What can go a long way towards resolving these cases is if the appraiser has a copy of the report that they did in their work file. Not only is it a USPAP requirement3 to do so, it is also smart, as it can serve as evidence to the court of what version of the report you personally did.
Verification of comparable sales:
Appraisers should use comparable sales that are arms-length transactions4. To verify a sale was arms-length, an appraiser confirms the sale with principals to the transaction, if possible, or with the brokers, closing agents, or lenders involved5. In appraisal litigation, one issue that sometimes arises is whether a comparable sale was adequately verified. Litigation, however, can come years after the fact. If you are handling hundreds of appraisals, you will not remember if you verified a sale with this person or that person. The best thing to do is to jot some notes into your work file of who you verified the sale with, and include any other documentation you looked at such as HUD-1s. Include their name, contact information and a brief synopsis of what they said.
I’m pretty good at math. Good enough so that, if I go out for dinner, I can figure out the tip in my head. There are some mathematical equations that no one can do in their head. One example would be some aspects of the cost approach, such as the market extraction method. If you use this or a similar mathematical formula for your appraisal, the notes on this should be in your work file. If they are not, and your appraisal becomes part of litigation, its findings could be challenged for not having the necessary support.
We had a case where the view adjustment on an appraisal done several years previously was at issue. The property looked out over a canal, and there was an ugly apartment building on the opposite bank. One side insisted that this apartment building ‘ruined’ the view. The other side insisted that, at the time of the appraisal, the apartment building was obscured by trees and foliage. We took up several hours of the judge’s time at trial trying to figure out what the view looked like. If someone had taken a good picture of the view at the time of the appraisal, this issue would have been resolved in five minutes. A few key pictures can offer a lot of protection. So if you’re doing an appraisal and ascribing a $100,000 adjustment for a glorious view of, say, a pasture, take a few good pictures so that you can explain your view adjustment. Especially if a view changes over time, you’ll be able to show why that view was worth so much at that particular point in history.
Searches for Comparable Sales:
My four-year-old daughter is a tall girl. The only reason I know this is by comparing her to her class, she’s usually in the back row for pictures. It works the same with comparable sales, you don’t know if a sale is a reasonable one to use unless you know what the range of sales was at that time. One allegation that frequently arises in my cases are that the comparable sales used were too high, or, more recently, too low. That is why it is so helpful to print out the search that you did for comparable sales. You may know that the sales you picked were reasonable, but if you don’t print out the search you ran someone looking at your work file years later won’t know.
A few key things in your work file can go a long way towards protecting you should you ever find yourself in court. While memories can fade, hard evidence will stay the same for years.
1 See Appraisal Standards Board, Uniform Standards of Professional Appraisal Practice Recordkeeping Section U-10 (2012-2013).
2 See Florida Statutes Section 95.11 (2012). For example, the statute of limitations to pursue a suit on a written contract is 5 years.
3 See Appraisal Standards Board, Uniform Standards of Professional Appraisal Practice Recordkeeping Section U-10 (2012-2013).
4 See Appraisal Institute, The appraisal of Real Estate 304 (13th ed. 2008)
5 See Appraisal Institute, The appraisal of Real Estate 304 (13th ed. 2008)
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Subject sold 06/2006, the sale price was $325,000. What would the subject’s 02/2013 hypothetical value be based on the 2006 market data and the 02/2013 market. The answer is in one of my blog articles.