Double Trouble - How Risky Are Hybrid Appraisals, And Where Do The Hazards Lurk

[Evincere]

By: Peter T. Christensen

Lawsuits related to hybrid appraisals have been filed against appraisers for years. By hybrid appraisals, I mean assignments in which appraisers forgo their own inspection of a property and instead provide an opinion of value utilizing a third-party property condition inspection.

http://www.valuation-digital.com/va...cle.action?articleId=1432906#articleId1432906

Will Fannie care one way or another about an Appraisers litigious plights that are sure to increase when used for origination? I think not.

 

[djd09]

i guess it isn't all about the fee.

you cannot scope away misleading or significant errors. the boys don't talk about that part.

 

[George Hatch]

If you want to use a really well-written disclosure, Mr C has provided one such example:

The appraiser has not identified any borrower, purchaser or seller as an intended user of this appraisal and no such party should use or rely on this appraisal for any purpose, and the appraiser shall have no liability to any such parties or any other party not identified by the appraiser as an intended user. Parties other than the client and intended user(s) identified in this report are advised to obtain an appraisal from an appraiser of their own choosing if they require a valuation for their own use. This appraisal report should not serve as the basis for any property purchase decision or any appraisal contingency in a purchase agreement relating to the property. No information in this report or utilized by the appraiser about characteristics or condition of the property should be considered a home or property inspection. Any party using or relying on this report, whether authorized or not by the appraiser, acknowledges and agrees that the appraiser has no liability or other responsibility for any matter relating to the condition of the property or other matters reported by any third party.

I'd prolly consider adding a paragraph break in there somewhere, but that's just how I roll.

 

[George Hatch]

i guess it isn't all about the fee.

you cannot scope away misleading or significant errors. the boys don't talk about that part.

Did you read the article?

 

[djd09]

sure the appraiser is getting sued for a third party inspection report. duh.

If the so called inspector tells me the house is 1,500 sq ft, when in reality it is 2,000 sq ft, that is misleading and a significant error. keep trying to scope it away.

every profession needs ambulance chasers.

 

[Evincere]

i guess it isn't all about the fee.

you cannot scope away misleading or significant errors. the boys don't talk about that part.

No, it’s NOT ALL about the Fee which is what so many have been saying all along. And contrary to being accused of being disingenuous by couching displeasure over fees behind costly litigation and/or public trust concerns.

 

[George Hatch]

His first line in that piece is that he's not seeing it in the residential hybrids so far, and he goes on to mention that there's probably not that much risk involved in doing one for internal purposes. But that doing them in assignments where the borrower might get a copy will raise your level of exposure. Then he criticizes the thoughtless use of copy/paste of the 1004 boilerplate as opposed to being smarter about your disclosures.

So don't be a form monkey. Be smart and make good decisions about what you're saying in relation to what you're doing. Don't put too much faith in fannie's willingness or ability to write an effective and defensible disclosure for your use. Be assertive.

Or, run away - that works, too.

 

[Non Sequitur]

It appears George is the only poster who actually read the article.

 

[Terrel L. Shields]

Fee should reflect not only time, expertise, but importantly, RISK... Without considering that a 3rd party ramps up your RISK by an unknown quantity, how can you afford to charge less than full fee? A suit, or complaint, can consume your wallet, win lose or draw. It can ruin you and cost you your license. There is a minimum you can sell your soul for.

Disclaimers are great. They don't stop you from getting a complaint. I've mentioned the suit I was in 15 years ago numerous times. Remember, I appraised that place 4 days AFTER the sale closed because the bank forgot to order an appraisal. Secondly, I was accused of valuing it for the amount of the mortgage (not the sale price), and the plaintiffs argued that they RELIED upon the appraisal claiming that the lender conveyed that value to them orally before the sale. And the report had a privity clause. The plaintiffs lost because by claiming they relied upon it, the statutes of limitations had run out since the report was 6 years old. But it still cost me a lot of time and money. Disclaimers are not a cross to stop a vampire in their tracks until dawn. Wordsmithing your way out sounds great but as a practical matter George nor anyone else cannot weasel word their way out of being sued. Irate borrowers wronged by an incompetent inspector will sue everyone and let the chips fall where they may. The classic timber cruise expertise problem exists because we don't know how to vet a timber cruise and we don't have the tools to vet some remote inspection done by someone we don't know and trust.

 

[George Hatch]

Fee should reflect not only time, expertise, but importantly, RISK... Without considering that a 3rd party ramps up your RISK by an unknown quantity, how can you afford to charge less than full fee? A suit, or complaint, can consume your wallet, win lose or draw. It can ruin you and cost you your license. There is a minimum you can sell your soul for.

Disclaimers are great. They don't stop you from getting a complaint. I've mentioned the suit I was in 15 years ago numerous times. Remember, I appraised that place 4 days AFTER the sale closed because the bank forgot to order an appraisal. Secondly, I was accused of valuing it for the amount of the mortgage (not the sale price), and the plaintiffs argued that they RELIED upon the appraisal claiming that the lender conveyed that value to them orally before the sale. And the report had a privity clause. The plaintiffs lost because by claiming they relied upon it, the statutes of limitations had run out since the report was 6 years old. But it still cost me a lot of time and money. Disclaimers are not a cross to stop a vampire in their tracks until dawn. Wordsmithing your way out sounds great but as a practical matter George nor anyone else cannot weasel word their way out of being sued. Irate borrowers wronged by an incompetent inspector will sue everyone and let the chips fall where they may. The classic timber cruise expertise problem exists because we don't know how to vet a timber cruise and we don't have the tools to vet some remote inspection done by someone we don't know and trust.

So then what's the problem? By your own example, doing right on the full-service workproduct didn't prevent you from getting sued.