Appraiser Liability, A Must Read

[Carnivore]

Ann O'Rourke's news letter had this great link.

This is an absolute read by ALL appraisers.

Look for your own states interpretation

Appraiser Liability

This should raise the bar on critical thinking in regards to USPAP and Appraisal File security.

Thanks Ann, your a great assett to the profession.

 

[Phil Rice]

The Colorado Court of Appeals [adopted § 552] in Wolther v. Schaarschmidt, 738 P.2d 25 (Colo. Ct. App. 1986). Colorado determined that a borrower could reasonably rely upon a lender's approval of the loan for his belief that the appraisal engineer's report concluded that the house was structurally sound.

Gotta love Colorado, the house is not structurally sound, they hold the "appraisal engineer" liable. Perhaps I need to add (yet another) disclaimer that I am an appraiser, but not an engineer and not an "appraiser engineer".

FWIW, there was a ballot initiative in Colorado to expand liability for "bad" houses, and the voters in Colorado turned it down. This does not mean you can't sue, it does mean that voters did not want to encourage more law suits. This was directed at builders, not appraisers.

 

[Tawfik Ahdab]

Thanks. That was a great read and an important reminder.

The current USPAP Compliance Addendum seems to provide even greater protection for appraisers than the limitations cited above. The USPAP Compliance Addendum attached to many, but not all appraisals in Georgia, states in pertinent part:

Purpose. Intended Use, And Intended User of The Appraisal:

The purpose of the appraisal is to estimate the market value of the subject property, as defined in this report, on behalf of the referenced client as the intended user of this report. The intended use of the appraisal is to assist the client, as the intended user of this report, in evaluating the subject property for lending purposes. The use of this appraisal by anyone other than the stated intended user, or for any other use than the stated intended use, is prohibited. (Emphasis Supplied).

While no case has yet interpreted the meaning of this clause, it would appear that this limitation would act to bar § 552 reliance by a non-client of the appraiser. Roberts, supra.

This is what I put in my letter of transmittal. (Bold for emphasis)

The intended use of this appraisal is to aid the intended user - the mortgage loan institution (hereby identified as the client by name in the body of the report) and its funding source - in evaluating the subject property as collateral for mortgage loan purposes. The borrower is not an intended user, and is not the client, but may obtain a copy of the report from the client at the client’s discretion. Obtaining a copy of the report and reading it does not in itself constitute use; reliance upon the appraisal report to make a decision or to take an action does. Use of this appraisal report by any person or entity other than the client named in the report is prohibited and renders the report completely null and void unless use was expressly authorized by the appraiser in writing at the time of aceptance of the appraisal assignment.

 

[Elliott]

Appraiser's should have never had two pages of
limiting conditions....cause it is viewed as a
"boiler plate" and you can ignore. Attorneys
truly drive me crazy . Everything should be
wooven into the appraisal with frequent emphasis.

elliott

This is what I think the key parts of the article are:

Whether these limiting conditions will act as a hold harmless agreement for cases presently in litigation is an unanswered question. However under the language of the Robert, supra, case, it is clear that hold harmless can be drafted into real estate appraiser boilerplate limitations. This seems to be because while § 552 expands liability, it is not a statute of strict liability.

The current USPAP Compliance Addendum seems to provide even greater protection for appraisers than the limitations cited above. The USPAP Compliance Addendum attached to many, but not all appraisals in Georgia, states in pertinent part:

Purpose. Intended Use, And Intended User of The Appraisal:

The purpose of the appraisal is to estimate the market value of the subject property, as defined in this report, on behalf of the referenced client as the intended user of this report. The intended use of the appraisal is to assist the client, as the intended user of this report, in evaluating the subject property for lending purposes. The use of this appraisal by anyone other than the stated intended user, or for any other use than the stated intended use, is prohibited. (Emphasis Supplied).

While no case has yet interpreted the meaning of this clause, it would appear that this limitation would act to bar § 552 reliance by a non-client of the appraiser. Roberts, supra.

 

[Richard Carlsen]

You all point out one more reason to take Rich's class on Limiting Your Liability as an Appraiser (or some sort of name like that).

You should see my addendum's, disclaimers, FIRREA page, etc. You would have to be an illiterate Mongolian to not understand that my report is nothing more than an appraisal report and to whom it is meant.

Take the class. It is well worth it.

 

[Kate]

I second that. Best AI class I have taken!!!!!!

 

[Mountain Man]

Cool find Andrew.... passing this one on.
And here's hoping that some Skippys don't get the message. :lol:


BTW, it was brought to my attention that the software I use (WCA) has a very similar statement built into our addendums.... and has been so for a couple of years!