Do Real Estate Appraisers Need More Liability Insurance?

Do Real Estate Appraisers Need More Liability Insurance?

In most cases, the job of a real estate appraiser isn’t all that problematic. But every once in a while, they can run into some difficulties in their jobs, simply because of the occasionally high-stakes nature of what they do; often, they’re evaluating properties that are being used in the biggest transaction of a person’s life, and what they determine here can often make or break those deals.

Those transactions can, unfortunately, occasionally be scuttled by difficulties that arise from an appraisal, according to a report from the Half Moon Bay Review. These are often real estate dealings that can stretch north of a million dollars or more, and what the appraiser has to say on the matter holds great sway over what happens next. This is because banks don’t loan based on the agreed-upon value of the property in question,  but rather on its appraised price. And when the latter is lower or higher than the former, that can lead to major issues for all parties involved, but usually the buyer in particular.

How do those issues shift to appraisers?
When these things happen, they can occasionally lead to legal problems, potentially including lawsuits if buyers do not feel the seller was forthright about issues with the property, the report said. Sellers who have multiple offers might not have to worry about that sort of thing in the event of an appraisal coming in lower than expected, as they can just move on to the next would-be buyer with the right amount invested, but those with few offers may face hard feelings or worse.

In some cases, it might be found that the lowered appraisal value was the result of a mistake made by the appraiser, or other potential problems, the report said. Part of the problem here is that these valuations are often based on little more than opinions and the values of properties with similar features and amenities, and that subjectivity could prove problematic. Sometimes, owners or buyers may want to challenge an appraisal, for instance, but it’s generally acknowledged that this often doesn’t do much to change that valuation in the end.

Appraisers often have a big say in a property sale.Appraisers often have a big say in a property sale.

What can be done?
In these cases, such professionals may not have as much recourse as they’d like to deal with the various legal problems that can arise from one of their appraisals. For this reason, it may be imperative for them to have as robust a small business insurance policy as possible to protect them from any potential costs that could come up when this is an issue. To that end, it might be wise for appraisers to shop around for the right kind and amount of liability insurance coverage so that they can rest assured they’ll be properly insulated from high costs. Taking that kind of effort to look for the best coverage at the right price will potentially save them thousands annually.