No one wants a lawsuit, but in today's litigious environment it's a reality that many appraisers and inspectors face. Here are some tips for avoiding costly and time consuming legal challenges for your business.
Appraisers: Double Check
Be sure to double check that the Gross Living Area being used in the appraisal is what is permitted by the city. In most cases, only GLA is used in calculating the final appraised value and just because people live in the garage or an addition does not necessarily mean it is GLA.
Appraisers: Protect Yourself With Research
Independently verify whatever the owners, realtors, sellers, or buyers tell you. If you cannot verify with an independent source, be sure your report clearly identifies who provided information and clarify that you are relying on that information in order to derive a final value. In other words, protect yourself, not your source.
Appraisers: Find The Best Comps
Use solid, defensible comps. If there are no good comps nearby ask the lender to let you use comps from outside the immediate submarket. If you get the lender’s written consent to use distant comps, it will be much more difficult for anyone to say you used the wrong comps, even if the loan sells several times in the secondary market.
Inspectors: Sign an Inspection Agreement
Before you start the job, be sure to create a thorough inspection agreement so it’s clear what your customer is expecting of you and what you plan to deliver. Having a solid agreement in place before you start the work is the best way to reduce grey area.
Inspectors: Get Changes In Writing
If you make changes to the Inspection Agreement or agree to return any portion of the payment for any reason, make sure to document this change in writing. The last thing you want is to have given a refund to a customer who turns around and files a claim anyway.
Appraisers & Inspectors: Do Your Own Math
Do not rely on the latest Excel feature or software tool to do the calculations for you. Computers are great, but they can make mistakes that you will pay for.
Appraisers & Inspectors: Stay Up To Date
Changes happen in the industry all the time. Keeping up with the latest changes in laws and best practices is crucial if you want to avoid costly legal challenges down the road. Subscribe to the FREA Echo to get regular updates on what's happening in the industry.