However, signing the agreement is not without risk. E&O
typically does not indemnify or defend a third party. So
an appraiser’s E&O policy does
not provide additional coverage for any added expense or
obligation incurred as a result of signing such an agreement.
So, the issue becomes a business decision with
appraisers once again thrust into a difficult spot: either open
themselves up to huge potential liability by
signing or give up AppraisalPort work at a time when many are
fighting just to keep the lights on. Despite the tough times,
many appraisers say they will refuse to sign an agreement with
such dire potential consequences.
Neil Olson, Chief Legal Officer for FNC says, “Like every other
website where transactions occur, there is a user agreement (in
place) with all of its users. We periodically review these
agreements and make appropriate changes to reflect new
circumstances, just as every other technology provider. As a
result, AppraisalPort issued an amended user agreement that will
become effective in September 2008. This user
agreement is almost the same as the one it replaces. Appraisers
may not sign up for or use AppraisalPort without agreeing to the
AppraisalPort agreement. When the new
agreement becomes effective in September, all AppraisalPort
users will then be subject to the
new version of the agreement.”
Virginia Showdown
Many appraisers see the
new FNC requirement
as a
reaction to recent hearings held before the Virginia Real Estate
Appraisers Board to regulate the use of web portals such as
AppraisalPort. According to George Dodd, SRA, the Virginia
appraiser who brought the petition to the Virginia Board, the
issue arose when he and other appraisers discovered errors in
their reports sent through AppraisalPort.
Dodd and
other appraisers learned their reports were not arriving in
their entirety through conversations with lenders. “We
discovered that our reports were not being delivered accurately
or completely because lenders were asking us questions about
missing items we had included in our original reports. For
instance, I did an appraisal of a historic home on 100 acres; a
four million dollar property. The original report was 65 pages.
What the lender received had entire sections missing and
comparable sales for several of the 14 comps were missing,” said
Dodd.
“The
goal of the petition is to establish once and for all that
appraisers have the right to deliver to a client an entire and
complete appraiser report and that no one has the right to alter
or convert it before the client receives it. If I’m responsible
for a report, I have the right to send it to a client
unadulterated” Dodd said.
Robert Coop, one of the many appraisers concerned
over the FNC user agreement and the status of their E&O policy,
told WRE, “If my report changes in any way (during the
conversion/transmission process), it’s no longer my work. I’ll
stand behind what I do; if they want to change or strip
something out, it’s their responsibly. It’s no longer mine.”
According to Olson,
appraisers have it wrong. “AppraisalPort does not convert
anything. Lenders use AppraisalPort to transmit requests and
appraisers transmit reports back,” Olson said. “We don’t do
anything to a report. What the appraiser sends is what the
lender gets. All conversions are done by the appraiser.
Sometimes there are formatting issues
in the
conversion
that arise that appraisers need
to check for; sometimes the lender does not give the reviewer
the whole report. Appraisers are responsible for making sure the
report they send is complete when they send it. Whatever
appraisers give us is what is handed over to the lender.”
According to Dodd, there is also a USPAP
compliance issue that needs to be resolved if sketches, photos
or other items are stripped out during the
conversion/transmission
process. “If you wind up sending a truncated or “limited”
appraisal instead of summary appraisal, due to glitches in the
conversion/transmission process, you now have violated the
Supplemental Standards
requirement of USPAP,” Dodd says.
The petition
before the Virginia Board to regulate web portals has been
withdrawn, according to Dodd, because it is clear that it was
not written in a way that would accomplish the goal and may have
resulted in a restraint of trade issue. The original petition
sought to prohibit the
use of appraisal delivery web portals that transmit altered
appraisal reports, whereas Dodd says it is now apparent that the
real issue is the lack of control appraisers have over the
conversion and delivery of their appraisal product. According to
Dodd the issue is far from over
and the Virginia Appraisal Board Committee continues on.
Find the original petition to
the Virginia Board (Petition
to the Appraisal Board Commonwealth of Virginia)
and the FNC response (FNC's
Response to Petition sent to Virginia Appraisal Board)
at WorkingRE.com; Sidebar.
FNC Lawsuit Update
You may remember FNC was sued last year in a
federal class action by a group of appraisers from across the
country for allegedly breaking a promise to not reuse or resell
appraisers' data sent through AppraisalPort. The complaint
alleges false advertising, misrepresentation, breach of implied
contract and more. It is asking for $5 million in damages. Find
the story, Federal Suit Alleges Misuse of Appraisers'
Data by FNC,
at WorkingRE.com; Library.
According to the attorney for the appraisers,
Tobey Marzouk, oral arguments about whether to go to trial or to
arbitration were presented before a judge in December 2007.
There is no ruling on the matter as of this writing.
Angela Atkins, FNC Public Relations Manager,
told WRE at the time, “FNC was very disappointed and disturbed
to hear of this complaint. It tries to attack FNC’s core
commitment of protecting the information we transmit between
appraiser and lender. As a result, we believe it is entirely
without merit and will defend it vigorously.”
Disclaimer:
This article is meant to be used for informational purposes
only. It is not the intent of this article to provide legal or
insurance advice, or advice for any specific fact, situation or
circumstance. Contact legal counsel and your insurance agent for
specific advice.
About the Author
David Brauner is Editor of
Working RE Magazine and Senior Broker at
OREP,
a leading provider of E&O insurance for appraisers and other
real estate professionals (www.OREP.org)
in 49 states. He can be contacted at
info@orep.org or (888) 347-5273. Calif. Insurance Lic.
#0C89873.
