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This article originally was published in 2007 and has been updated in 2022.

Many appraisers do not realize that claims and potential claims can begin in numerous ways. A claim may not always start with a lawsuit.

Sometimes the appraiser receives what seems to be a friendly phone call and a simple request for information. Sometimes, the appraiser gets a letter asking that a copy of the appraisal report be provided.

There could be a nasty phone call or a letter which is full of threats or demands.

Maybe the appraiser is served with a subpoena asking that he or she produce a copy of the appraisal file or that he or she testify at a deposition in connection with some ongoing lawsuit.

All of these occurrences could signal the beginning of a claim against the appraiser. How the appraiser responds in these early stages could have a significant impact upon the future development and resolution of the claim and could also have an impact on available insurance coverage.


  • If you are served with a lawsuit, DO notify your insurance company immediately. Failure to give timely notice could jeopardize coverage under your policy.
  • If you do not have insurance, DO contact an attorney who is experienced in the handling of real estate related lawsuits.
  • DON'T ignore the complaint in the hope that it will disappear. It won’t! Ignoring the situation could only make it worse. Failure to respond to a lawsuit in a timely manner could result in a default judgment being entered against you.
  • DON'T take it upon yourself to respond to the complaint by writing a letter to the Judge or by calling the court to tell them your side of the story. That does not count as an official response and, most likely, will be rejected by the court. Again, your failure to adequately respond to a complaint could result in a default judgment being entered against you.

Phone calls

  • If you get a phone call about your appraisal report, whether it be friendly or nasty, DON'T get taken off guard. Compose and calm yourself. Listen to what is being said and to what is being asked. DO take notes, so you can remember the contents of the call.
  • DON'T discuss an appraisal with someone who is not your client. You must have the client’s permission to discuss the appraisal with a third party-no matter how nice that third party might appear over the telephone!
  • If the phone call comes from the client, or if you receive the client’s permission to discuss the appraisal, DON'T answer questions or provide information "off the top of your head". Find out exactly what are the problems or concerns of the caller. DO ask questions. Then get the appraisal report and the file and review it, objectively, to determine if the problem, questions or criticisms are justified.
  • DON'T admit that you did anything wrong. Even if you find that there is an error in the appraisal, that error may not have been the cause of any loss. Even if a review appraiser wrote down your value by 10%, if the loan is still current and performing, how has any party been harmed? Even if there was a small error in your square footage calculation, if the adjusted value was still high enough to support the loan, how has any party been harmed? Making an admission of fault or liability could also serve to jeopardize your insurance coverage.
  • DON'T agree to make any payments to any party without discussing it with an attorney or with your insurance company. It may make sense to refund the appraisal fee or to agree to pay for a minor repair. Perhaps you did make a mistake or perhaps you simply want to avoid the time and the frustration of an extended fight with someone. You should never agree to make any kind of payment unless the other party agrees to give you a Release. This means that your payment is in return for them agreeing not to make any further claims against you. If you agree to pay for one small repair, and do not get a signed Release, who do you think they will call first when the next thing breaks down or when the next problem is discovered?
  • The same holds true for an agreement to waive an outstanding fee, an agreement to perform future work for no fee or for a reduced fee, etc. DON'T agree to any fee arrangements to avoid or to resolve a claim or a potential claim without getting a signed Release.

Subpoena for deposition testimony or to produce documents

  • A subpoena for you to testify at a deposition or asking you to produce appraisal documents could signal the beginning of a claim. DO take the subpoena seriously. Contact an attorney or your insurance company. Even if you are not a party in the ongoing lawsuit, find out if someone intends to make you a party. Find out what the lawsuit is about. Find out why they want to ask you questions about your appraisal.
  • DON'T attend a deposition without an attorney present or without having discussed it beforehand with an attorney. Your testimony at the deposition could cause one of the parties to decide that you did something wrong and that you should be added to the case. Maybe you have had your deposition taken before when you were hired to be an expert witness. The attorney who hired you to act as an expert probably met with you before that deposition to prepare you for the types of questions the other side might ask. DON'T forego that kind of preparation when you and your appraisal report are going to be the target of the questioning.

It is important to realize that how you react when first confronted with a claim or a lawsuit could impact upon the future development of that matter. If you have an in-depth discussion of the appraisal report with a party who is not your client, you could be violating confidentiality provisions. If you admit to making a mistake to a borrower and offer to settle without getting a signed Release, you could open yourself up to a torrent of future petty claims whenever repairs need to be made to that property. If you ignore a complaint and put it away in a file, without responding, you could find yourself with a judgment for money damages being entered against you.

When first put on notice of a potential claim, a claim or a lawsuit, try to remember these simple DO'S and DON'TS.



Better Safe than Sorry

An appraiser was served with a summons and complaint. This was his first experience with a lawsuit and he did not really know what to do. He read over the complaint and became furious. The borrower was accusing him of all sorts of things and was telling complete and total lies.

The appraiser addressed a four-page letter to the judge whose name appeared on the first page of the summons. He explained that he owed no duty to this borrower, that the complaint contained numerous lies, he denied that he did anything wrong and asked the judge to dismiss the lawsuit immediately. The appraiser did not notify his insurer or even discuss the lawsuit with an attorney.

A few months went by and the appraiser heard nothing more about the disturbing complaint. He assumed the judge had received his letter and that he had nothing more to worry about. The insured did not mention this lawsuit on his professional liability renewal application because he assumed the issue of his involvement was resolved.

Some time later the appraiser received mail concerning the lawsuit. He looked at some of the mail but did not understand the legal mumbo-jumbo and decided to disregard it. Eventually the appraiser received a document stating that a judgment was entered against him. He called the attorney for the plaintiff to explain that he had done nothing wrong. The plaintiff`s attorney requested that he answer some questions under oath and the appraiser agreed. He testified at a deposition for several hours and volunteered the name of his insurance company. At the conclusion of the deposition, the plaintiff`s attorney refused to dismiss the appraiser and refused to set aside the judgment; he indicated that he intended to call the appraiser's insurance company to demand payment of the judgment.

The appraiser`s insurance company declined coverage due to late notice (they first found out about the lawsuit almost 2 years after it had been filed and served) and due to the appraiser`s failure to disclose the lawsuit on his subsequent renewal application.

Mistake Does Not Equal Liability

One of our insured`s received a nasty call from a lender. The loan officer referred to an appraisal assignment that was completed about 3 years ago. He alleged that the insured overstated the square footage and the value of the property. The lender had foreclosed on the defaulted loan and sold it for almost $100,000 less than the loan balance. The loan officer wanted to know what the insured intended to do about their loss and also threatened to make a complaint to the state board asking that her appraisal license be revoked.

The loan officer`s threats and accusations frightened the insured. She found the appraisal file and was sickened to see that she had made a mistake. She had added the square footage from the guesthouse twice and therefore the report did overstate square footage and value.

The first call the insured appraiser made was to the lender. She apologized for the error and said she would report the incident to her insurance company and "they would make it right". We investigated the allegations; it was true that the appraisal overstated square footage and value; however, the loan amount was low. The property would have still qualified for the loan even with the correct square footage and lower value.

After the loan was made, the borrower relocated due to his employment and decided to rent the property. The new tenants did significant damage and it was their damage that caused the property to sell for less than the loan amount. If it had remained in good condition, the property could have resold for far more than the outstanding loan balance. We explained that the appraiser was not the cause of any loss and declined to pay the claim. The lender filed suit because the appraiser had "promised" the insurance company would pay.

The case was dismissed after a great deal of attorney fees were paid. We suspect a lawsuit would not have been filed if the insured had not made assurances to the lender at the outset. The first call to make should always be to your insurance company, and never make any admissions.

Philanthropy Misinterpreted

An appraiser called to report that he had been served with a summons and complaint. The borrower sued him and several other parties claiming that they failed to disclose various defects in the property she had purchased. The appraiser was furious about the case and insisted he had no duty to the borrower and that he had done nothing wrong. He was also insistent that the insurer pays nothing to the plaintiff.

The lawsuit progressed for a few months and plaintiff`s counsel sought to take the deposition of the appraiser. During the deposition it emerged that the plaintiff contacted the appraiser a few weeks after the mortgage closed to complain that her roof was leaking. In response to her request, the appraiser paid her about $8,000 to help with the roof repairs. The appraiser`s defense attorney was surprised by this revelation.

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After the deposition the appraiser admitted that he spoke to the plaintiff just after the mortgage closed. She was a single mother and did not have money to repair the roof. She insisted that someone had to help her and because the appraiser felt sorry for her, he agreed to pay for the repairs. He never asked her to sign a release. When the plaintiff experienced other problems with her home she reasoned that the appraiser must be the responsible party because he paid to fix her roof. She called the appraiser to ask for additional money and became angry when the appraiser refused.

The appraiser`s benevolence probably served to instigate the filing of the lawsuit. It also got him in trouble with his insurance company as the policy states that no insured is to admit liability nor did he disclose his dealings and settlement with the plaintiff on his renewal application. The insurance company declined coverage.

Copyright 2007. Liability Insurance Administrators. All rights reserved.