Editor’s Note: Real estate attorney Todd Stevens sees a trend in real estate law: attorneys are waking up to the potential liability of review appraisers. Couple this with the common misunderstanding among review appraisers that their risk is less than the author of the original report, and you get a burgeoning new area of litigation.
Review Appraisal Liability
By Todd Stevens
In my practice, review appraisers increasingly are being named as defendants in lawsuits. In the typical transaction, the review appraiser has a contractual relationship with the lender while the original appraiser, retained by the mortgage broker or Appraisal Management Company (AMC) to perform the original report, does not. Lenders usually include language shifting some of the risk of loss to the reviewer. Lender/reviewer contracts often contain provisions permitting the party prevailing in a lawsuit to recover court costs as well as the fees paid to lawyers. Carefully read any contract you are asked to sign by a lender who is hiring you for review work. You may be able to negotiate out some of the more onerous provisions.