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As an evaluator in the real estate business, the threat of litigation is real. There are lenders who are looking for fall guys, notorious “investors” who are looking for a suckers in order to commit scams, and mortgage agencies who always order you for higher values. Here are some things you need to do to handle this threat. 1.) Prevention. Make yourself a less attractive mark. 2.) Movement. Shift the liability to another entity, such as the client or the purchaser. 3.) Manage it. The justice system is your ally; employ it to your benefit. Have Errors and Omissions Insurance from a reputable company that will defend you with local contract attorneys. 4.) Recognition. Declare that it is real and insure against it, such as with errors and omissions insurance. 5.) Turn a deaf ear. Act as if it never happened and hope it never will. 6.) Disappear. There are other careers that have more potential than this uncertain business. Here are a few frequent reasons why a home appraiser gets stuck in a lawsuit and litigation. 1.) Failing to determine and report improvement and site defects. On purchase appraisals, it’s a very good idea to get hold of the signed Seller’s Disclosure forms if you request for a duplicate of the purchase agreement. Include a note to the appraisal that shows that the evaluator has reviewed the Seller’s Disclosure Statement. Ensure that you get a duplicate of the Seller’s Disclosure Statement. During inspection, ask the seller if they are aware of any mold problems. Once the inspection is complete, the seller can review, answer, and sign the appraiser’s form. 2.) Erroneous computation of gross living area. Do not simply rely on data from the former appraiser, notes taken from the multiple listing system, county records, or details from the architect. As soon as the appraiser obtains a set of details for proposed construction, those details should be confirmed with CAD software to verify the living area size. If the evaluator waits for the final inspection to verify it’s will be too late. If the subject has an addition to the living area, such as an enclosed carport/garage or porch, this should always be separated in the sketch and in the report – even though the area still has equal contributory value. All modifications to the living area even though the calculated area is still the same should be noted separately in the report and on a separate sketch. 3.) Didn’t report leakage of the roof, settlement or foundation cracks, basements that are wet, termite infestation and mechanical failure. 4.) Increasing or decreasing the value of a property. You are likely to deceive if you don’t have the required skill and E&O won’t protect you if found guilty. It was shows that approx. fifteen percent of fraud cases deal with appraisers who have little or no experience. 5.) You are appraising the wrong estate. 6.) You did not check and double check, period. Everything in the FNMA 1004 form should have been confirmed. Verification should be the primary job during an appraisal. 7.) Defamation. The review appraiser humiliating the appraiser rather than the report itself, therefore the insulted appraiser sues the review appraiser. As an appraiser you cannot fully take away the burden of liability for your appraisals rather by being conscious of and steering clear of these drawbacks you may be able to avert any expensive litigation.
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This article was written by William D. Cobb with the assistance of Chandler Smith. Bill owns Accurate Valuations Group and has performed as a real estate appraiser for 15 years now primarily in the Greater Baton Rouge, LA market. For more information on William D. Cobb and Accurate Valuations Group, visit Baton Rouge Louisiana Home. Chandler Smith is a top real estate professional in the Houston and Austin area. He manages Austin Real Estate Appraisal
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