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Of course, in order to win a case against an appraiser, the claimant must be able to prove each of the elements of the claim, typically negligent misrepresentation. One of the primary elements requiring evidence is that the appraiser made a mistake- fell below the standard of care. We have handled cases where appraisers have made mistakes like calculating the wrong square footage of the home, using sales as comparables where they where truly not comprable and failing to make appropriate adjustments in the comparable property’s sales price for differences between that property and the subject.
Proving the “mistake” will generally require another expert to review and evaluate the subject appraisal report for errors. The expert appraiser can use his/her background, experience, training, industry guidelines and standards, among other resources, to determine whether the appraiser has been negligent in the subject valuation and/or appraisal report.
With most appraisals that I review, it is reasonably easy to impeach the appraiser who prepared the original report. Most mistakes can be identified when such data sources as the MLS Listing for the comparable property is reviewed.
There is one line item adjustment in appraisal reports that I find is the most abused, this is the “condition adjustment”. I find that this line item is so often used to inflate value that I have given it a new name, I call it the “Bogus Condition Adjustment”.
The Subject is always in “good” condition and the Comp is always in “average” condition and the appraiser makes a +25,000, +50,000 even +75,000 upward condition. Unfortunately for the appraiser, when I review the MLS Listing for the comp, the Listing Agent has noted comments like: “new roof, new windows, new granite counter tops, new hardwood floors, new, new, new….” The appraiser has totally misrepresented the condition of the Comp.
Unbelievably, these appraisers not only note that they have utilized MLS as a Data Source, but they actually include the correct MLS Listing Number on the adjustment grid. Who do they think that they are fooling?? This makes it very easy to impeach them.
The Forensic Review part of my practice has exploded this year as more and more appraisers are being sued. This is not going to abate soon!
John C. Carlson
CA Certified General Real Estate Appraiser
Diamond Bar, CA
http://www.jccrea.com
Good points. Berk & Moskowitz, P.C. has handled cases recently where the appraiser simply accepted the representation in the listing that the subject had a new roof and other upgrades without actually verifying that the work was done, let alone that quality work was done. There are a lot of line items where the appraiser can intentionally manipulate the conclusion of value or negligently make mistakes. In my experience, the main ones include condition, view and location. But, there are many others.
Kent S. Berk, Esq.
http://www.BerkMoskowitz.com