Working RE: Low cost, same-day E&O Insurance

Taking Care of (Your) Business
by David Brauner, Editor

Two files sitting on my desk and several other stories this issue speak to why the success or failure of your business in today’s world depends on knowing who you work for and who you work with, as much anything else.

One file concerns an appraiser dragged into a claim against a sub prime lender accused of predatory practices; the second demonstrates why providing a comp-check value conclusion is bad business as well as bad appraising.

As an insurance provider, Working RE sees an increasing number of appraisers dragged into lawsuits where fraud is the primary issue, rather than an error or omission. If that doesn’t surprise you, think what that says about the times we live in!

Careful who your Friends Are
The first file involves alleged misrepresentation regarding interest rates and other terms of a loan in question, as well as forged documents and other pleasantries. The court documents allege that “false promises were made to mislead and deceive the borrower, to have them agree to the loan and for the loan officer to obtain the immediate profits and fees generated by the loan.” You get the (ugly) picture.

According to the suit, these fraudulent acts resulted in the homeowner having negative equity in the home, becoming financially insolvent and filing for bankruptcy. This may be a scenario that occurs more frequently as the housing market slows. It also alleges that the appraisal was inflated by over 30 percent. While it is too early to know, we have seen appraisers in similar circumstances eventually cleared and dropped from their suit (many sleepless nights later). For them, legal problems were due not to an error evaluating a property but to an error in judgment about who they choose to do business with.

Of course, we also see appraisers and lenders convicted of fraud and sent to jail. In these cases, no one sheds any tears.

File Two: Comp Checks
When it comes to comp checks, many appraisers walk the line between customer service and a USPAP violation. Some leave the comp check option open to service their best clients- within the rules of course; some just say no to anything other than an order.

The second file on my desk documents the now familiar lender tango: a loan officer asks an appraiser to okay a value before proceeding with the appraisal. The appraiser does a quick “comp check” and derives an unsupported value that, in this case, is not enough to make the deal work. True to form, the loan officer moves on to the next appraiser on the list in search of compliance.

The next appraiser on that list happens to be the reader who submitted the documents we now discuss. He had a very different answer for the lender in question. 

“The lender told me: ‘Please note that you are required to notify us with any valuation issues prior to the submission of this report.’ I told him that I cannot abide by that rule. I told him that I will complete the assignment and deliver it in written form. And that unlike the first appraiser, I do not do desktop appraisals (comp checks) for free. The lender told me to hold off.”

Our reader says he does not do desk top appraisals for free and says he feels sorry for the appraisers who waste their time with them. He says playing ball with these kinds of clients- either by providing a value or as in this case, a free comp check, often results in being shut out.