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...
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...
The Statute of Limitations for a Claim Against an Appraiser 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...
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...
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...
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,...
Appraiser Confidentiality: Loose Lips, Big Claims, USPAP Absurdity, and Subpoenas Allegedly “Loose Lips” Cause a Big Claim. A recent and relatively big appraiser liability claim involved a commercial appraiser’s alleged breach of confidentiality. The damages paid to the plaintiff were significant. According to the plaintiff’s complaint (my recounting of the facts here is simplified), a lender had engaged the appraiser to perform an appraisal for a construction loan to the developer of a shopping center. Some of the information received by the appraiser included lease commitments from prospective tenants. The anchor tenant was a well-known retailer. The appraiser completed the assignment, but...
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...
The implosion of the real estate bubble reverberated across the American landscape. Neither residential nor commercial markets were spared. This implosion not only had a very palpable effect on the economy, but on the political debate of this nation as well. That political debate—as it seems is often the case—has turned to finger-pointing. Those fingers have now curled up into a fist, and that fist is now knocking on the doors of appraisers across the country. In the aftermath of the economic downturn, many banks were taken over by the Federal Deposit Insurance Corporation (FDIC) after their balance sheets dived...
ESA Bankruptcy, Is Chase to Blame or a Victim? 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...
