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Licensing Board Administrative Notice: Your immediate attention is required!

Updated text from 2003 Claim Alert

There has been a marked increase in reported complaints against appraisers to state licensing boards in the past few years. A complaint that generates an investigation can happen to anyone. Regardless of what starts the process, when you receive notice that an investigation has been opened, the importance of a thorough and timely response cannot be overemphasized.

The Complainant...

The complaint is filed with the State - most often by one of three parties: a borrower, a lender, or another appraiser. The borrower is not happy with your appraisal and is looking for justification to sue you. The lender is hopeful that the state will find violations in your appraisal, which will allow them to pursue litigation to mitigate their loss. Or, perhaps the complainant is a disgruntled competitor.

Source of disciplinary complaints (claims data 2015-2018)

  • 61% Borrower or purchaser
  • 16% Property seller
  • 8% Appraisal management company
  • 6% Lender
  • 5% Miscellaneous (litigation party, estate beneficiary, another appraiser, etc.)
  • 3% Real estate agent
  • 1% Government agency

Your first notice...

The State notifies you that they have opened an investigation because someone has filed a complaint. A complete copy of your report and work file is requested. You may also be asked for a rebuttal or response to the complaint. IN EITHER CASE, YOU MUST RESPOND.

What to do immediately...

1. Call the state licensing board. Ask questions. Find out as much as you can about the investigation, what prompted the investigation, and what response is appropriate. Always be courteous and polite.

  • Find out how much time the Board anticipates will be needed to complete the initial review.
  • Ask if you will be notified if the investigation is concluded with no violations found. Some states send a courtesy letter advising that no violations were found and that the file has been closed.

2. Call your E&O insurer for potential legal assistance with your response. Follow their guidance and consult with their attorney if advised to do so.

  • Many policies now provide limited coverage for disciplinary matters if reported promptly. Look in your policy under the "Supplemental Payments" section to see if disciplinary proceedings are covered. Be sure to follow reporting requirements as stated in your policy. (If you do not have E&O insurance, contact your attorney at once.)

3. Respond professionally and as soon as possible.

  • Your response is your opportunity to demonstrate professionalism. Since detail is the best defense, be thorough in your written response and have it reviewed by competent legal counsel before you provide it to the state. Such legal counsel can also determine if the situation merits a response written by the attorney rather than you. This will be the investigator's first impression of you and your work.

The wait begins...

Your next contact will come from the Board. They may request additional information, a telephone interview, or a face-to-face meeting. Many states have backlogs, so it may be a long wait.

If the finding is against you...

In most cases, the Board will send a written notice that they have found violations, and that sanctions are to be imposed. Such discipline might include:

  • An educational requirement
  • A monetary penalty or fine
  • A requirement to provide the Board with a log of future appraisals performed
  • Private or public reporting of discipline
  • License probation
  • License suspension
  • License revocation

The Board's notice will advise you of your options, which may include:

  • Acceptance of their findings by signing their proposed consent order; or
  • Contest the findings at a hearing before the board or an administrative law judge. It is strongly recommended that you have legal representation with you should you request a hearing even if you believe that you did nothing wrong.

If you receive a document listing specific violations, it may be appropriate to send a rebuttal offering supporting evidence and additional information. This may supersede the need for a hearing or further legal action.

If the finding is in your favor...

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Most states will contact you to let you know that the investigation is "closed". Some don't. Don't hesitate to call for an update on your case.

Finally...

A notice of investigation or complaint is serious, even if you are sure that you can prove it to be unfounded. Your response must be as timely and professional as possible. Consequences can include damage to your reputation, loss of earning potential, probation, suspension or revocation of your license, and civil lawsuits. In addition to publication in board newsletters and websites, you risk being removed from the lender's approved appraiser lists if public sanctions are imposed.

As always, the best loss prevention advice is thorough documentation, and a professional, timely response to your state licensing board.

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