The frequency of negligence claims against appraisers for work performed at the height of the real estate bubble is winding down, but as this occurs, new areas of litigation are emerging and focusing on appraisal review, according to an article published in the First Quarter 2014 issue of Valuation magazine.
One explanation for the increase in appraisal review lawsuits is the sheer volume of work being performed — more now than ever before — while another is that some review appraisers lack the necessary competency to perform the work and fail to understand their risk when performing reviews.
The article noted two types of claims that most often are made against appraisers performing review assignments: loan origination/purchasing and defamation.
What’s behind the loan origination/purchasing claims? Lenders often rely on the accuracy of an appraisal to support a loan decision but they may also rely on a review to assess the quality of that appraisal in making their decision. Therefore, appraisal reviewers — without ever having provided their own opinions of value — are essentially exposed to the same potential for liability to lenders as the appraisers who perform the appraisals being reviewed.
What’s behind the defamation claims? Review appraisers are more susceptible to libel and slander claims than are appraisers who perform standard appraisal work. With any type of review there is the potential for the appraiser whose work is reviewed to be offended or injured by the content of a negative review. In some situations, a negative review can result in the appraiser losing work, winding up on a “blacklist,” facing disciplinary action or being sued for professional negligence.
Read the Valuation magazine article.