Top Reasons Appraisers Are Sued

November 20, 2020

Lawsuits leveled against Real estate appraisal professionals are usually pursued by plaintiffs who are ultimately disappointed with a home’s value that was determined by the appraiser. Even if an appraiser took every precautionary measure to limit the chances of being sued, there is still the chance of ending up as the accused. But while most lawsuits against appraisers are frivolous, there is always the potential for legitimate cases where clients may pursue legal action.

Reasons Why People Sue Real Estate Appraisal Professionals

An appraiser’s job is to inspect a property to determine the current value of it. Most of the work to determine the overall value of a real estate appraisal occurs during the inspection of the home, where the appraiser does everything from conduct room-by-room walkthroughs to valuing amenities like pools and basements to noting the health or safety code violations for the official report. However, like any job, there is always the risk of error taking place, whether intentional or unintentional.

Here are some situations in which an appraiser may find themselves on the wrong end of a lawsuit:

  • Negligence: One way negligence claims can occur concerns the square footage of a property. Since appraisers are supposed to measure a property but often don’t, a client may feel they were being taken advantage of for the benefit of the appraiser’s time. As for allegedly failing to notice fire damage, termite infestations, or a leaky roof, appraisers should have accountability for that which they should sensibly find in a standard inspection process. Appraisers may miss actual physical details, which could open them to lawsuits related to negligence, like cracks or leaks. However, clients should not expect appraisers to uncover every delinquency in a property’s integrity.
  • Fraud: Appraisal fraud falls into the same category as mortgage fraud and is an intentional act by the real estate appraisal professional that ends up hurting their client. Appraisal fraud occurs when a home’s value is intentionally appraised at an overstated rate by the appraiser in charge, well above actual market value. The inflated value obtained through fraud is then used to help a seller get a better price than the housing market would otherwise justify, and the appraiser may be in on the scam to get a kickback or percentage of their earnings.
  • Property Damage: Appraisers may review a property without an owner onsite, such as appraising vacant properties. It may be possible that a real estate appraisal professional faces accusations about damage to a property after his or her visit. Unfortunately, it’s hard to prove that an appraiser didn’t cause property damage, such as marks on the wall or broken glass. When it comes down to it, it’s your word against theirs, making proper insurance coverage all the more important.

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.