COVID-19 Lawsuits Against Appraisers on the Rise?

December 4, 2020

The ongoing and unprecedented COVID-19 pandemic has brought significant disruption to multiple industries and lifestyles, opening the door to potential long-term damage in our health care system, economy, and legal arena. As we all try to find ways to adapt to these times, particular industries and professionals must learn how to navigate potential legal liabilities. This includes the Real estate appraiser field, which finds itself potentially in the crosshairs for negligence-related claims and lawsuits.

COVID-19 Claims on the Rise

These claims made against real estate appraisal companies and professionals filed during the pandemic relate more to the financial challenges that some mortgage lenders and borrowers face because of the economic issues brought on by the spread of the virus, disrupting the economy in its wake.

The claims point to alleged errors in appraisals amid COVID-19. However, these types of claims exist despite the pandemic as appraisers are often faced with these types of accusations. Because of the novel coronavirus, these claims are becoming more frequent because more lenders and borrowers face loan issues and other financial hardships due to the economic fallout.

Furthermore, because real estate appraisal professionals have seen more business in recent years, there may be instances where appraisers become complacent, leading to a lapse in judgment or work quality. This, in turn, leads to higher than normal legal activity.

An appraiser’s responsibility is to examine a property to verify its current value. Most of the work to ascertain the overall value of a real estate appraisal occurs during the home inspection, where the appraiser conducts room-by-room walkthroughs and applies value to various amenities. More importantly, an appraiser is in charge of detecting and producing any notes on health or safety code violations.

Despite the recent boom in business, estate appraisers are human, and are capable of making a mistake. But even if they aren’t at fault, the homeowner or client might feel the appraiser is responsible for something that was overlooked.

But beyond negligence, appraisers might be witting or unwitting partners in fraud schemes as well. Fraud happens when a home’s value is intentionally appraised at an inflated rate by the appraiser, well above actual market value. The inflated value obtained through fraud is typically used to help a property owner get a higher valuation than the housing market would otherwise rationalize. The push for the appraiser is to get a cut of the kickback that the seller receives, which is illegal.

Regardless of the claim, real estate appraisal professionals must inform themselves of the potential losses and claims they face daily. While every industry continues to navigate COVID-19, carrying the proper insurance protection can limit overall damage brought on by frivolous or legitimate claims by clients.

About Associations Liability Insurance Agency (ALIA)

The ALIA Team (part of the Riverton Insurance Agency Corporation), specializes in helping real estate professionals find the affordable and comprehensive liability insurance they need, without the hassle. ALIA dates its roots to 1991 with the founding of FREA, Foundation of Real Estate Associates. In 2013, ALIA was created to work with multiple insurance companies thereby broadening the portfolio of products to customers. For more information about our products and services, contact us today at (800) 882-4410.