Appraisals and a Few Litigation Issue

As appraisers we are all very well aware of the risk involved with personal property appraising and the potential of a lawsuit for a wrongful valuation. The IRS has penalties assessed against the appraiser for improper valuations, also, individuals may sue if they are not pleased with a valuation. To protect yourself, make sure the scope of work is properly explained, limiting conditions are noted and the report and workfile are well documented.

Not to alarm my fellow appraisers, but there are other areas where there is potential for a lawsuit. Lets not forget disparagement of title. This involves authentication issues as well, but the appraiser, if not careful could easily be brought into a suit. An example of a tort action for disparagement might be where a client states he has a piece of art by an certain artist, or a piece of furniture by a particular cabinetmaker, and upon examination the appraiser considers the authenticity to be in question and renders the opinion and valuation. Should the appraiser be wrong in this situation, he may be sued under a disparagement of title action.

How about negligence? Do you hold yourself out to be an expert, and as qualified to render expert valuation opinions. If an analysis of the report reveals a lack of due diligence such as an improper, inadequate or less than full examination, the appraiser could be sued for negligence should the clients property be devalued due to the appraisal report.

When dealing with negligence there simple negligence, where the work effort is minimal and not sufficient to render a proper and researched value under the scope of work and there is gross negligence, where the appraiser knowingly and intentionally values property incorrectly. This scenario typically happens when the appraiser is pressured into rendering a misleading value. Some real estate appraisers are now grappling with this situation as they rendered inflated home valuations in order to keep a lenders business.

Just some food for thought and items to consider as the personal property appraisal field becomes more standardized and professional in scope. Whenever opinions are given, there is always room for debate, and therefore potential for conflict and litigation. Be professional, use the proper amount of due diligence and the potential for litigation will be greatly reduced. Poor research and examinations, sloppy report documentation and unprofessional ethics may all lead to potential litigation problems. Be smart, document research and value conclusions and be professional.