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Disciplinary Proceedings Do's and Don'ts

Many appraisers have had to defend themselves in a disciplinary proceeding. That should come as no surprise. For the past several years, disciplinary proceedings have accounted for about 70% of all the “claims” reported by LIA-insured appraisers.

Depending upon the state in which the matter is filed, the proceeding begins with a complaint, an allegation or maybe a grievance. Over 90% of these investigations are initiated by third party complaints. Third parties include borrowers/purchasers, sellers, and real estate agents.

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The underlying cause of most complaints is a problem with the appraiser’s value conclusion. The overwhelming majority of complaints about value allege that the appraiser undervalued the subject property. This complaint is often made by sellers, and listing agents. It is also made by refinance borrowers who do not agree with the appraiser’s opinion.

Unfortunately, in recent years we have seen these value complaints often intermingled with personal attacks against the appraiser arising from the appraiser’s alleged conduct, comments, and appearance.

The good news is that only about 10% of the disciplinary proceedings we have overseen in the past 5 years have resulted in any formal discipline. The most common type of discipline imposed might include a fine and perhaps some required education hours. This type of discipline is also published on the state licensing board website.

The majority of all investigations are resolved after a finding of no USPAP violations, so the complaint is dismissed. In some instances, the dismissal might be “Conditional,” meaning the appraiser has to complete recommended education prior to the dismissal. In some states, the dismissal is accompanied by a “Letter of Warning,” alerting the appraiser to issues, or practices that warrant attention. These matters are addressed between the appraiser and the licensing board. The resolution is confidential and nothing is published.

Dealing with a disciplinary proceeding can be upsetting and frightening. Many insureds worry more about this type of investigation than they do about a lawsuit because they know their license is at stake. It is crucial that an appraiser take the right steps to handle these proceedings promptly and correctly.

If you receive a notice that a disciplinary proceeding has been commenced against you, what should you do and, more importantly, should you not do?


DO deal with the situation as soon as possible. The state regulators will always provide specific dates for a return of the documents requested and for the receipt of a written response, in states where a response is required.

DO organize the work file and related documents before sending them to the regulators. Be sure to proofread any written response. The response you send creates an impression of you and your professionalism.

DO make sure your response is complete. Read the letters carefully upon receipt. In some states, you only need to produce documents. Other states require a written response to the allegations. Some states have specific questionnaires that must be answered. Be sure to provide the investigator with everything that is requested.

DO notify your E&O insurer promptly. Errors & Omissions policies require that the insured give notice of the receipt of a complaint/allegation/grievance from the state regulators within a certain amount of time. You should also confirm what coverage might be available under the policy to assist with the investigation/defense.

DO try to relax. The process is stressful, especially if your state keeps matters confidential and does not disclose the name of the complaining party. Worrying will not make the investigation proceed any faster, nor will calling the investigator for updates again and again.


DON'T ignore the request from the licensing board. Putting the documents aside, or in a drawer, will not make the matter disappear. Failure to timely respond to the request for information could be viewed as administrative non-compliance and grounds for disciplinary action.

DON'T talk to anyone else about the complaint, other than your E&O insurer and/or an attorney who might be assisting you with the investigation. The appraisal report is still confidential with your client. The mere fact that a complaint has been made against you doesn't mean you can discuss the report with your peers, third parties, etc.

DON'T agree to return the appraisal fee, or to pay any amount, to make the problem "go away." If you agree to some sort of settlement with the complaining party, they cannot "withdraw" the complaint. The investigation will continue.

DON'T try to hide your mistakes. If errors were made, it is best to admit to them up front. Perhaps the errors were corrected in a revised report. Perhaps the errors had no impact on the opinion of value. Whatever the circumstances, it is best to admit to the mistakes. The regulators will find the problems eventually. Better to be forthcoming.

DON'T admit to USPAP violations. While the report might contain errors/mistakes, it is not your place to conclude whether those errors constitute violations of USPAP. That is for the regulators to decide.

Personal Attacks Can Be More Difficult to Refute Than Professional Critiques

In many states the appraiser is provided with a copy of the complaint submitted to the licensing board. In most instances they have to respond to questions about their value conclusion. It is “easy” to explain why certain comparable sales were chosen and why other sales were rejected. It is “easy” to explain why personal property (like top of the line kitchen appliances) did not impact value. It is “easy” to explain why improvements to the property did not result in a dollar for dollar increase in value. But it might not be quite as “easy” to respond to a personal attack, especially when the appraiser flat out denies the accusations.

It is best to focus on providing a professional response to the assertions rather than responding to any insulting remarks mentioned in the complaint. Calling the complainant a liar or hurling back more insults will likely not be taken seriously during the investigation, and could hamper your credibility.

Example 1:
In one complaint, the property owner was irate that the refinance appraisal did not reflect what he considered to be the true value of his home. He explained why he thought the comparable sales were inferior to his property and suggested that the appraiser failed to assign sufficient value to all the various improvements that had been made over the years. Rather than restricting his comments to value issues, the property owner then insulted the female appraiser’s personal appearance. He claimed the appraiser showed up at his door looking “dirty and sloppy.” He claimed her hair was not brushed and he went on to say the appraiser appeared as if “she had rolled out of bed and showed up for the inspection wearing clothes she had slept in the night before.” Lastly, it was claimed that the appraiser was “overweight” and that her clothes were “ill-fitting.” The property owner even attached blurry images captured by his Ring doorbell to document the appraiser’s unkempt appearance.

Needless to say, the appraiser was both surprised and insulted by these comments. To her credit she responded to all of the complaints having to do with her opinion of value. She then briefly explained that appraisal inspections sometimes require her to inspect attics, basements, crawlspaces and other areas that can be dirty and infested. She does dress “casually” when conducting her inspections and she apologized if her appearance was in any way offensive to the property owner.

A few months later, the investigation was concluded and the complaint was dismissed.

Example 2:
A seller complained when the appraisal prepared for the prospective buyer’s lender did not meet the contract price. The seller and the listing agent disputed the insured’s comparables. The seller alleged that he had provided a list of “better” sales and said the appraiser stubbornly refused to reconsider his opinion when provided with overwhelming support for a higher value.

Lastly, the seller said the appraiser was flat out “rude” during his inspection. The seller attempted to engage the appraiser in nothing more than friendly conversation during the inspection. The appraiser “grunted out one-word responses” and sometimes ignored the seller completely. The seller concluded by stating that the appraiser needed to understand he should show a person common courtesy upon entering their home.

The appraiser was frustrated by the complaint, although he said it was not unexpected. Despite what was claimed by the seller, the appraiser said he did indeed consider the seller’s suggested sales. In fact, the appraiser submitted an updated report to the client in which he detailed why each of those suggested sales was far superior to the subject. The main point of contention was that the subject home had only an obstructed water view, which the appraiser tried to show in numerous photos attached to the report. The seller, and his agents, submitted “better” sales for consideration, all of which were waterfront properties.

The appraiser was adamant and insisted that waterfront properties were not appropriate comparables for the subject which had only a partial water view. The appraiser also addressed the allegations that he had been rude to the homeowner. The appraiser explained that he tries to refrain from engaging in conversation with anyone that is present during an inspection. He wants to focus on the task he is performing so he does not overlook anything of importance. He is also mindful of saying anything that might be misunderstood or misconstrued. The appraiser insisted that he was courteous and denied that he grunted at anyone.

The licensing board did not take issue with the chosen comps or the final opinion of value. They did however, suggest that in future reports, the insured might provide more support for the adjustments he made to the chosen comps. In their Letter of Warning, the board recommended that the insured take a class on Support for Adjustments. The board stressed that this did not constitute reportable discipline and that the complaint was being dismissed. The appraiser’s demeanor during the inspection was not even addressed.

Example 3:
A seller was furious when the appraisal prepared for the lender working with the prospective buyer came in at less than the contract price. The insured appraiser was not surprised when he received the complaint. He notified the lender when it became apparent that he was not going to arrive at a value conclusion even close to the contract price. The appraiser was provided with several other sales for his consideration. He submitted a revised report in which each of these sales was discussed in detail. In the end, the appraiser stuck with his original value conclusion, despite a less than veiled threat from the listing agent that she would encourage her client to complain to the licensing board.

While the appraiser was not surprised to read the value criticism, he was surprised by certain other allegations. The seller claimed that when the appraiser called to schedule a time for the inspection, he expressed an opinion that the contract price “seemed high.” The seller went on to say that, despite setting up a specific time for the inspection, the appraiser arrived over an hour late and did not even have the courtesy to call to advise he would be late.

In his response, the appraiser explained his process for selecting comps and reiterated his comments about the seller’s suggested sales which were originally set forth in the revised appraisal. The appraiser also noted he had never been provided with the seller’s phone number and denied ever speaking with the seller, much less commenting about the contract price.

The appraiser attached an email thread between himself and the seller in which they agreed upon a date and time for the appraiser to inspect the property. In this email, the seller noted that the property had a lock box, that no one would be home all day, and that the appraiser could let himself in. The appraiser admitted that he was running late after a prior inspection took longer than expected. He presumed either the seller, or his agent, saw from the lock box that the appraiser arrived for the subject inspection over an hour later than the time originally agreed. The appraiser said that based upon the seller’s comments in the one and only email exchange, the appraiser didn’t think a call about his late arrival was necessary.

About two months later, the appraiser was notified that the complaint had been dismissed.


Disciplinary proceedings are very common. Part of the reason might be that the process of generating the complaint is pretty easy. Typically, anyone can fill out a simple online form and then click submit.

Whether frightened, annoyed, or a bit of both, the appraiser who receives one of these complaints must take it seriously. Just remember that you don’t have to navigate these waters alone. Contact your E&O insurer for guidance, support, assistance and, if needed, a referral to local counsel experienced in defending such matters.

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