Friday, June 1, 2018

Appraiser Disciplinary Complaints: Who is Filing Them? What for?

We were doing some research for a project and came up with some basic data that appraisers may find interesting about disciplinary complaints to state appraiser licensing agencies.  Who files the complaints? What's the basis? Well, here's some data from claims reported to LIA Administrators & Insurance Services in the last three years: 

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Wednesday, May 30, 2018

Appraisers Insured by LIA: Free CE Seminar in Santa Barbara on June 12

For real estate appraisers insured by LIA -- especially those in or near Santa Barbara:

Thank you for buying your E&O insurance from LIA!  We are hosting a free CE seminar in our hometown Santa Barbara.  The seminar is entitled “Hot Topics & Myths in Appraiser Liability.”
Aside from giving our local appraisers free CE and good education, the purpose of this offering is to film the presentation.  We will be using clips for an upcoming on-line seminar. Don’t worry: audience members won’t be filmed.

The date and time are: June 12, 2018, 1:45 p.m. to 5:00 p.m.  The location is at a local private club and will be given at the time of RSVP.  We will have hors d'oeuvres and beverages following the seminar, if you’d like to stay and chat with local colleagues or some of us at LIA.

Please let me know soon, if you’d like to attend.  The venue is small and limited to 30 seats, which will be given in order of RSVP. 

This is the seminar:

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Monday, May 21, 2018

"Hybrid Appraisals" - Speaking about the Liability Risk to Appraisers and Others at The Appraisal Foundation's Joint Council Meeting

"Hybrid appraisal" liability? I am looking forward to speaking about the subject at a joint meeting of The Appraisal Foundation's two advisory councils -- The Appraisal Foundation Advisory Council (composed of 60 non-profits and government agencies) and the Industry Advisory Council (composed of 35 business entities with interests in valuation).  "Hybrid appraisals" (which provide a desktop value opinion from a licensed/certified appraiser relying on a physical inspection of the property by a third party) are being marketed by AMCs and technology companies as a big part of the future of residential real estate valuation.  Examples of these products include Accurate Group's ValueNet and HouseCanary's AgileAppraisal.

What liability risks do we see?

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Tuesday, May 15, 2018

Are Commercial Appraisers Entitled to Overtime? A Pending Class Action Filed Against a Bank Might Answer that Question

Overtime class actions by residential real estate appraisers have ravaged large appraisal firms and management companies for the last six years. While there were a few earlier cases, the first signs that overtime litigation under the federal Fair Labor Standards Act (FLSA) would become a widespread problem for appraisal firms and AMCs came in 2012, as appraisers were being laid off at some large firms. The writing was on the wall, and I warned of the trend in a February 2013 blog post. Two months later, a collective action seeking unpaid overtime was filed against Bank of America and its AMC LandSafe Appraisal Services in the U.S. District Court for the Central District of California. The lawsuit resulted in a $36 million settlement which was distributed to hundreds of past and present LandSafe staff appraisers. (The legal documents discussed in this article can be found in this area of my website: Overtime and Employment Cases.)

While the settlement amount was perhaps astounding in that case, the biggest impact it has had on other firms and AMCs has stemmed from the trial court's order on a summary judgment motion. Before we get to the significance of that order and whether commercial appraisers need to be paid overtime, let's take a look at general federal overtime requirements as they apply to appraisers.

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Monday, May 7, 2018

Newly Published California Case Helpful to Appraisers: Tindell v. Murphy

Today, the California Court of Appeal, Third Appellate District certified for publication its recent decision in a case entitled Tindell v. Murphy. The case involved mortgage borrowers who sued a real estate appraiser blaming the appraiser for a purchase they made in 2005 at the peak of the real estate bubble. The trial court had dismissed the borrowers' suit because they were not intended by the appraiser to use the appraisal, as the appraisal was prepared for the lender, and the Court of Appeal upheld that decision in a straightforward opinion. However, the opinion was not originally slated for publication, meaning that it would not serve as precedent for cases involving other appraisers.

I was pleased to assist both the Northern California Chapter of the Appraisal Institute and the National Association of Appraisers with the drafting of requests for publication filed with the Court of Appeal asking that the opinion be published. This is the only way that the opinion would ever help other appraisers, especially residential, in future cases filed by parties who are not intended users of the appraiser's work. The leadership of the Appraisal Institute, its Northern California Chapter, and the NAA recognized the need to try to get the case published. And, in response to their two requests, the Court did so. The opinion and the requests for publication are available on my site:

The individual appraiser in the case was not an insured of my company (LIA Administrators & Insurance Services) nor a member of the Appraisal Institute or NAA. She was defended by Peter Catalanotti, now of the firm Freeman Mathis & Gary, LLP. I appreciate that he brought the unpublished decision to our attention, so that the appraiser groups could work to get it published and create meaningful precedent for appraisers. The decision is significant for appraisers in California because it gives greater legal meaning and effect to appraisers' identification of intended users in appraisal reports when courts are considering whether a borrower (who is not an intended user in appraisal assignments for mortgage lenders) or other similar parties may sue an appraiser for negligent misrepresentation.

For those who want a deeper understanding of how the decision in Tindell v. Murphy relates to and builds on prior caselaw in California, here is how we explained the matter in the Northern California Chapter of the Appraisal Institute's request for publication -- it is the explanation to the Court why its opinion should be published:

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Tuesday, May 1, 2018

Appraisal Firms and "Hybrid" AMCs: Beware of the Dynamex Decision and Its Impact on Classifying Appraisers as Independent Contractors in California

Classifying "staff appraisers" as independent contractors, rather than as employees, is a very common business practice among real estate appraisal firms. It also has become fairly common for appraisal management companies (AMCs) not only to manage the delivery of appraisals that are performed by independent contractor appraiser panel members but also to now employ staff appraisers, as employees, who perform some of the appraisals managed by the AMC -- these AMCs are what I would call "hybrid" AMCs because they are functioning both as AMCs and appraisal firms.

Today, on April 30, 2018, the California Supreme Court issued a landmark decision in Dynamex Operations West, Inc. v. Superior Court. The decision could have a big legal impact on both true appraisal firms with "1099" staff appraisers and on hybrid AMCs. In its opinion, the Court held that for purposes of California's Industrial Wage Orders, which specify overtime requirements among other things, a firm classifying a worker as an independent contractor bears the burden of establishing that such a classification is proper under the so-called “A-B-C test” used in a few other states. To meet this burden, the firm must establish all three of the following factors to justify treating workers as independent contractors:

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Monday, April 23, 2018

AMCs and Lenders Fighting Over Next Generation Valuation Products and Technology

The residential valuation business for mortgage lenders has been taking big steps lately toward wide scale replacement of the historical Uniform Residential Appraisal Report (URAR or 1004) form used in mortgage lending. As this movement happens, some would-be providers of replacement valuation products (such as "hybrid" appraisals) and automated valuation models (AVMs) are fighting over technology turf and trade secrets.

There are currently three big legal battles over alleged misappropriation of trade secrets relating to residential valuation technology and services. Here's a synopsis of the three battles:

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Monday, April 9, 2018

Appraisers in Arbitration - Legal Risk?

As real estate appraisers seek to diversify their services beyond traditional lending work, one of the fields I think appraisers should be looking to more is serving as an arbitrator. When disputes concern real estate interests, appraisers are well-positioned to offer their expertise not only as valuation experts for one side, but also as decision-makers in the role of an arbitrator. For appraisers interested in pursuing assignments as an arbitrator, I wrote a short piece for the Appraisal Institute's Valuation magazine (4th Quarter 2017) -- the purpose was largely to help appraisers feel comfortable about the different legal risks that arbitrators may face. 

The article tells the true story of an appraiser serving as a commercial rent reset arbitrator sued (unsuccessfully) by a tenant who felt their rent was reset too high.  The case concerned a building in Beverly Hills and the value of the leased premises was around $40 million. Here's an excerpt:

"At the arbitration, the building owner’s appraiser-arbitrator presented an $18 million land valuation, while the landowner’s appraiser-arbitrator proffered $50 million. The appraiser-arbitrator in the middle decided on a $40 million valuation, which formed the foundation of the arbitration award. Stuck with that outcome, the building owner rushed to court, suing (among several other parties) the appraiser-arbitrator who served in the middle. Through its high-powered lawyers, the building owner made a variety of scary legal claims like “breach of the covenant of good faith and fair dealing,” and made a demand for “millions of dollars in losses derived from this defective appraisal award” plus punitive damages. It sounded like the whining of a very sore loser.
Having previously witnessed this type of situation, my colleagues and I wondered how many days it would take for the lawsuit to be dismissed. How could we be so sure that the building owner had made a colossal error in suing the appraiser-arbitrator in a rent reset arbitration?"
You can learn why the appraiser-arbitrator won the case by reading the article entitled:  "Take a Seat: Appraisers Shouldn't Let Liability Fears Prevent Them from Sitting in an Arbitrator's chair."  It's a free link.

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Thursday, February 1, 2018

Classifying Appraisers as Independent Contractors - an Issue for Appraisal Firms and Maybe Some AMCs Too

A hot legal issue that is more often affecting appraisal firms and similar businesses, such as inspection and field service management firms, is the classification of workers as independent contractors, rather than as employees.

In some lawsuits, plaintiff workers argue that they were improperly classified by firms as independent contractors and then claim that, if they had been treated properly as employees, they would have been entitled to compensation for overtime, as well as reimbursement for expenses.  In other situations, the issue is a governmental audit for unpaid taxes or disability/unemployment contributions. 

I have addressed this subject for appraisal firms in a recent article that appeared in the Appraisal Institute's Valuation magazine. The article entitled "Independent Minded" is available digitally at this link:

In the article, I've summarized a case that should be considered by any companies engaged in "vendor management." The result of the case was the re-classification of scores of "workers" (some of the workers were individuals but others had incorporated their own businesses) who worked as independent contractors to a nationwide field services management company. What happened in the case? 

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Wednesday, January 31, 2018

Appraiser Overtime Class Action Against CoreLogic, Filed 12-29-17

AA residential staff appraiser has filed an overtime class action lawsuit against appraisal management company CoreLogic Valuation Solutions. The appraiser is a current employee and works as a staff appraiser in Southern California.  On behalf of herself and a putative class of similar CoreLogic staff appraisers, she alleges that CoreLogic's compensation practices violate the overtime pay requirements of the federal Fair Labor Standards Act and California state labor laws.  The case will be legally interesting to watch because CoreLogic allegedly pays its employee appraisers on a partially "piece work" per appraisal basis with additional compensation based on production and other factors. The plaintiff alleges that she and other staff appraisers "frequently are required to work far in excess of forty hours per week," but that their compensation for the overtime hours do not properly include the "bonus pay" in calculating overtime compensation.  Under the law, the overtime rate of pay must be 1.5x the overall regular hourly rate (or 2x for double time), even when the employee is paid on a piece work basis. Many appraisal firms pay their staff employee appraisers per appraisal and it will relevant for such firms to follow this case.

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Tuesday, January 5, 2016

Appraiser Expert Witness Issue: Discovery of Draft Expert Witness Reports (Draft Appraisals) in State Court - a Chart

Appraiser Michael Brunson, SRA, MNAA, and I recently wrote an article for the Appraisal Institute's 4th Quarter 2015 edition of Valuation entitled “Getting Ready for Expert Witness Work: 10 Practice Pointers.”   One of the pointers is that while the Federal Rules of Civil Procedure (Rule 26) now generally protect a retained expert witness's draft reports (e.g., draft appraisals) from discovery by the opposing party, appraisers need to understand that if a litigation is pending in state court and thus subject to the state's rules of civil procedure, the protection regarding drafts may be different or non-existent.  We suggested that expert witness appraisers should have a specific discussion with the attorney retaining them about the preparation and retention of draft appraisal reports and about the potential for being required to produce them as part of the discovery process. 

The following excerpt from the article discusses the importance of understanding the potential “discoverability” of a draft report:

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Tuesday, September 29, 2015

Appraiser E&O Insurance: Understand the Concepts of "Claims Made" and "Prior Acts" Coverage in Your Policy

When it comes to E&O insurance, all appraisers should take the time to understand the concepts of "claims made" and "prior acts" coverage in their policies.

Let's start with this basic fact -- all E&O insurance sold to appraisers and similar professions is "claims made" insurance coverage. To understand how claims made coverage works, let's consider the following simple claim situation: an appraiser performs an appraisal for a lender in 2006. The appraiser is sued by the lender over that appraisal in 2015. The appraiser had E&O insurance in place in 2006 and continues to have coverage in 2015, when he is sued by the lender.

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Wednesday, April 29, 2015

LenderVend Requirement For Appraisers to Upload Copies of Appraisal Workfiles

Update Note 8-1-15: The entry below was published in April 2015.  Subsequently, appraisers reported to us that LenderVend abandoned the workfile policy requirement it had announced.  

Many residential appraisers we insure and several appraiser organizations have contacted us in the last few days about an appraisal management company's new requirement that their panel appraisers upload a PDF copy of their appraisal workfile for each assignment they perform.  The AMC is LenderVend, LLC and, according to its website, it is affiliated with mortgage lender Provident Funding.

We understand that LenderVend’s requirement imposes an additional burden on appraisers.  We've also heard firsthand from appraisers about the anxiety the policy is creating because of the unknown uses to which the workfile may be put by the AMC.  As is the case with any peculiar requirements imposed by particular AMCs or lenders, we think that appraisers should weigh these issues in deciding whether they want to perform services for the AMC or lender and/or in deciding how much to charge for their services because of the extra work entailed. 

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Monday, November 3, 2014

Appraisal Management Company Sued in Consumer Class Action Complaint

A consumer class action complaint has been filed against a lender and its AMC relating to the subject matter of a prior CFPB investigation and settlement. 

Last August, the Consumer Financial Protection Bureau (CFPB) announced that it had taken action against Amerisave Mortgage Corporation, its affiliated AMC Novo Appraisal Management Company, and one of the owners of both companies Patrick Markert. Part of the CFPB's action concerned alleged overcharging for appraisal services by the AMC and failure to disclose the AMC's affiliation with the lender. Under a consent order, Amerisave and Novo agreed to pay $14.8 million in refunds to consumers and a $4.5 million penalty. Mr. Markert individually agreed to pay an additional $1.5 million penalty.

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Monday, September 8, 2014

Liability Prevention CE Seminars in Wichita, KS on September 19, 2014

The Greater Kansas Chapter of the Appraisal Institute is hosting two liability prevention seminars I am teaching on September 19, 2014 in Wichita, KS. The chapter has priced these seminars at a great value for all appraisers – and all appraisers are very much invited and welcome to attend. The present registration charge is just $15 for a total of 7-hours of appraiser CE. Plus, appraisers insured with LIA can receive up to a $50 discount on their E&O premium for taking the seminars (see below for more information).

The chapter has a good number coming, but there are seats available. If you don’t have time on Friday for the full day, you can just attend the morning session and get credit for 4 hours. The morning provides a general overview and is geared to lending work, while the afternoon is geared to non-lending work.

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Tuesday, September 2, 2014

FREE/Discounted Appraiser CE in Hawaii for Appraisers Insured by LIA. Other Appraisers Are Also Welcome to Attend.

Appraiser Bill King and LIA's general counsel Peter Christensen are teaming up to offer several important CE seminars for appraisers in Honolulu on October 2 and 3. Bill will be offering a 7-Hour USPAP update course and Peter will be offering two liability prevention seminars. These seminars are being offered at very low cost. For appraisers insured by LIA, the seminars are further discounted or free. Whether insured by LIA or not, all appraisers are welcome.

Both seminars will be held at the Airport Honolulu Hotel, 3401 North Nimitz Highway, Honolulu, Hawaii 96819. Please sign up early. Space is limited. Registration is separate for each seminar. You may sign up for one, two or all three.

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Thursday, June 26, 2014

FDIC Settles Case Against CoreLogic Valuation Services, fka eAppraiseIT, for Less than 10% of Its Original Demand

Call this one a loss for the FDIC.

In May 2011, the Federal Deposition Insurance Corporation filed suit against CoreLogic Valuation Services, formerly known as eAppraiseIT, in connection with appraisal services managed by eAppraiseIT for failed lender Washington Mutual.  (See post about the initial lawsuit filing here.)  The FDIC's lawsuit at that time concerned 194 allegedly flawed appraisals (mainly, desk reviews), cherry-picked by the FDIC's experts from approximately 260,000 individual appraisal services managed by eAppraiseIT for WaMu in 2006 and 2007.  The FDIC demanded more than $129 million in damages relating to those appraisals and filled its complaint with allegations about "gross negligence." 

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Monday, April 7, 2014

FREE Appraiser CE Seminar, Liability Issues for Appraisers Performing Litigation and Other Non-Lending Work, 5/2/14, Las Vegas, NV

I am teaching our 3-hour CE seminar about non-lending appraisal liability in Las Vegas on May 2. This seminar is very generously being hosted for free by the Las Vegas Chapter of the Appraisal Institute. Again, the seminar is free. Plus, LIA's insured appraisers who attend become eligible for an E&O discount as mentioned below.  Yes, we’re basically paying our insured appraisers to learn how to lower their own risk!

Space is limited. Appraisal Institute members and non-members, LIA-insureds or not, are all very much welcome and invited to attend the seminar.

This is the seminar – it’s a new topic:

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Wednesday, April 2, 2014

Warning for Appraisers about CoStar Copyrights and Licenses

In the last week, CoStar Realty Information has filed several lawsuits against commercial appraisers and real estate brokers for intentional copyright violations and fraud relating to the alleged use of CoStar property data and photos without proper registration/payment.

If you use CoStar, be sure you are doing so properly and within the terms of your license agreement. Examples of the types of alleged situations that have led to CoStar's recent and past copyright lawsuits are:  (1) sharing IDs/passwords, (2) obtaining an ID/password for an appraiser or other person who is not employed with the company licensed by CoStar, and (3) using IDs/passwords outside of the facility for which the ID/password is licensed.

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Monday, March 10, 2014

LIA's CE Seminar in San Jose and Other Upcoming Locations: "Staying Out of the Courtroom Unless You're Being Paid to be There"

I am teaching our 3-hour CE seminar about non-lending appraisal liability in San Jose on March 27. This seminar is hosted by the Silicon Valley Branch of the Northern California Chapter of the Appraisal Institute. Our insured appraisers who attend become eligible for an E&O discount as mentioned below.

AI members, non-members, LIA-insureds or not, are all very much welcome and invited to attend the seminars.

This is the seminar – it’s a new topic:

Liability Issues for Appraisers Performing Litigation and Non-Lending Work
aka “staying out of the court room unless you’re being paid to be there”
3 Hours Appraiser CE credit available for CA, OR, WA and NV
CA BREA Approval No. 13CP119903001

Expert witness work, divorce work, appraisal review . . . I’ll let you know where potential liability exists and perhaps improve your provision of such services.

Course Summary
Most current discussion of appraiser liability focuses on lawsuits and claims relating to appraisals performed for mortgage lending. However, appraisal assignments for litigation and other non-lending purposes actually present a greater liability risk to the appraiser on a per assignment basis. This seminar begins with an overview of current appraiser liability issues and then addresses the specific liability risks associated with appraisals for litigation, divorce, estate, tax, conservation easement and other non-lending purposes. It also addresses special liability considerations for review appraisers and supervisory appraisers. Actual lawsuits involving appraisers form the foundation of the seminar.

These are the kinds of questions that appraisers get answered in this seminar: Who sues appraisers serving as expert witnesses and what do they sue for? Who sues appraisers performing appraisals for tax purposes? What’s the surest way for an appraiser to be sued for non-lending work? What’s the likelihood of being sued about a retrospective review appraisal? How does potential liability for a retrospective review compare with potential liability for a contemporaneous review? What are the statutes of limitation for claims? What special provisions should I consider putting in engagement letters for different types of non-lending assignments?

E&O Discount Information
Appraisers who are insured by LIA’s E&O program or who purchase E&O from LIA with Liberty Mutual within a year after the seminar become eligible for a one-time discount on their premium of $50 for a $500K or $1m per claim policy or $25 for a $300k per claim policy per appraiser by completing the seminar. Only one discount per insured appraiser per year – i.e., an appraiser may not obtain multiple discounts in the same year by taking multiple seminars offered by LIA.

Seminar Date, Time and Location
Thursday, March 27, 2014, 3:00 to 6:00, networking social afterward
National University, 3031 Tisch Way, 100 Plaza East, San Jose

Fees and Registration
This class is hosted by the Silicon Valley Branch of the Northern California Chapter of the Appraisal Institute. The fees for the classes are set and collected by the chapter and registration for the classis through the chapter. The cost through March 13 is $40 for AI members and $50 for non-AI members (note the E&O discount).

I cannot sign you up. Here is the link with registration information for this class:

I have future seminars on the above topics and other topics scheduled for:
Louisville, KY, with KREAB, February 11 (Lending work oriented class)
Lexington, KY, with KREAB, March 14 (Lending work oriented class)
Florence, KY, with KREAB, April 4 (Lending work oriented class)
Atlanta, GA, with AI Chapter, April 23 (Same seminar described in post above)
Columbia, SC, with AI Chapter, April 24 (Same seminar described in post above)
Las Vegas, NV, with AI Chapter, May 2 (Same seminar described in post above)
Orange Beach, AL, with AI Chapter, 3 and 4 Hour Seminars, June 20 (Same seminar described above plus a 4-hour lending oriented seminar)
Thank you,
Peter Christensen
General Counsel
LIA Administrators & Insurance Services
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Sunday, February 9, 2014

"Fake" Appraiser E&O Insurance

For many appraisers and also some AMCs (appraisal management companies), the only reason they purchase professional liability insurance (E&O) is because a client requires them to show coverage in order to receive work.  The fact that some appraisers and AMCs only look at insurance as an "E&O ticket" leads to some unfortunate examples of fraud, which appraisers, firms, AMCs and clients should be aware of.

Before I get to the fakery, however, I'll explain that our purpose in providing E&O, and also the reason that most of our insureds purchase it, is because E&O first serves the insured by providing a defense for covered professional negligence claims against the insured and, then, if legal damages are established or resolved against the insured, paying those damages for which the insured is liable.  A big part of the value in this equation is providing access to knowledgeable, experienced legal counsel in connection with appraisal claims.  In other words, E&O insurance exists for the primary benefit of the insured appraiser or AMC.

Outright "Fake" E&O

Nevertheless, the reality is that because an "E&O ticket" is required just to get work from many clients, every year hundreds of appraisers and even a few AMCs fake their E&O coverage.  We see the evidence of this fact when clients, regulators or law enforcement contact us to inquire about an appraiser's or AMC's supposed coverage.  Most of this fraud, however, goes undetected because most lenders (and also most AMCs) perform no upfront diligence of E&O coverage, either regarding its actual existence or what a particular policy covers.  Thus, the fakery is usually not discovered until a claim situation arises -- unless the lender has had another reason to be suspicious.

The regular situations of fakery that we see are:

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Monday, February 3, 2014

General Liability Insurance for Real Estate Appraisers

Many appraisers are now being asked to carry general liability insurance by their clients -- in addition to the professional liability insurance that has been a standard requirement for many years.  This is partly the result of the OCC's new Risk Management Guidance for banks under its jurisdiction. The OCC's Risk Management Guidance was issued as a bulletin on October 30, 2013 and applies to the "third party relationships" that banks have with outside parties to whom they outsource services or functions.  This includes appraisers and AMCs.  As a result, we are seeing new insurance requirements appear for appraisers and appraisal management companies in service or contractor agreements with banks

As for appraisers, the most common change that we are seeing is that banks (or their AMCs) are often now requiring that appraisers carry CGL (commercial general liability) insurance as well as the E&O (professional liability) coverage that is almost a current universal requirement.  The typical limit required for CGL is $1 million per claim/occurrence.    

What is the typical additional cost of coverage to an appraiser for general liability insurance?

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Tuesday, January 28, 2014

LIA's Upcoming Liability Prevention Presentations with the Kentucky Real Estate Appraisers Board

I will be teaching the liability prevention portion of three upcoming 7-hour CE seminars with the Kentucky Real Estate Appraisers Board.   These KREAB seminars are popular and there is an E&O discount for LIA-insured appraisers who attend.  In the morning of each seminar, I will teach our liability prevention topics.  In the afternoon, Tom Veit and Larry Disney from KREAB will cover the most common USPAP deficiencies in discipline and KREAB news, statutes and regulatory changes.  The day will end with Q&A with KREAB members.

Locations and Registration
A total 7.0 hours of KREAB CE credit is approved for each day.  The seminars are scheduled for:

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Sunday, December 8, 2013

Class Action Lawsuit Filed Against BPO and AMC Firms for Allegedly Unpaid Fees

[Please note the author has no involvement with this case, other than reporting about it here. If you have questions about the case, please direct them to the attorneys representing the plaintiff, for whom contact information from the complaint is provided below.]  

On December 2, 2013, three law firms in New Jersey, Washington and Colorado teamed together to file a class action complaint on behalf of real estate agents and others allegedly owed unpaid fees for broker price opinions ordered by  The complaint also names three-related companies First Valuation, LLC, First Valuation Services, LLC, and First Valuation Technology, LLC as defendants on the basis that they are "alter egos" of and do not have true corporate separateness in their operation.  The lawsuit was filed in federal court in Colorado, where the defendants are based.

The named plaintiff in the lawsuit is Kathy Wornicki, a Florida real estate agent, who alleges that she is owed $880 for a number of BPOs performed in 2012 and early 2013.  The fee for each assignment was generally $25 or $35.  She contends that has breached a contract to pay for those services within 60 days.  She further alleges that the defendants have not only failed to pay her but also failed to pay hundreds or thousands of other persons performing BPOs.  The plaintiff's lawyers refer in a few places to BPOs as "evaluations" and "appraisals" but the lawsuit appears only to relate to fees for actual BPOs and not any other services managed by the defendants.  For jurisdictional purposes, the complaint alleges that the total amount of fees at issue exceeds $5 million but does not allege the number of agents or others owed money.  However, the complaint seeks to litigate the case as a class action on behalf of all such persons and firms.  These are the allegations in the complaint regarding members of the proposed class:

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Tuesday, November 26, 2013

Recent Tax Court Decision Provides Another Warning for Appraisers Performing Conservation Easement Appraisals

Gorra v. Commissioner, U.S. Tax Court, T.C. Memo 2013-254.

On November 12, 2013, the U.S. Tax Court decided a petition challenging the IRS' disallowance of a tax deduction for a donated conservation/preservation easement.  The donated easement was for the ostensible purpose of preserving a building fa├žade and other historical characteristics of a property located in New York City. The gist of the decision is that the Tax Court found that the taxpayers were entitled to a deduction for the easement and that the appraisal submitted with their return was a "qualified" appraisal, but that a "gross valuation misstatement" had been made.  The original appraisal submitted by the taxpayers with their return had valued the donated easement at $605,000.  A different appraiser hired by the taxpayers to provide a valuation as an expert witness in the tax court proceeding valued the easement at $465,000 -- in other words, the taxpayers' own expert witness would not support the original appraiser's valuation submitted with the tax return.  The IRS' expert opined that the easement had no value because of the local historic preservation laws already restricting development of the eased property.  In the end, the Tax Court concluded that the value was $104,000.  As a result, the Tax Court also concluded that the taxpayers were liable for a 40% penalty for  a "gross valuation misstatement."

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Thursday, November 21, 2013

Federal Court Rules on USPAP Confidentiality Issue in FDIC Lawsuit Against Appraisers in Colorado

Updated from an earlier post.  On September 5, 2013, in a professional negligence case against two Colorado appraisers by the FDIC, a federal court ruled on an issue concerning USPAP confidentiality.  It was a simple issue, but it's one of the very few court decisions relating to USPAP's poorly written confidentiality rule (this previous post here explains why the rule is poorly written).  This is the rule:
An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: the client; persons specifically authorized by the client; state appraiser regulatory agencies; third parties as may be authorized by due process of law; or a duly authorized professional peer review committee ...
The question for the court was: in response to a discovery demand in the case, did one of the defendant appraisers have to handover appraisals of the same property that were for different clients and unrelated to the loan at issue despite the confidentiality rule in USPAP?  The court's answer was an easy "yes."

The FDIC Lawsuit.  The FDIC's negligence claims in the lawsuit stem from two appraisals of a single family residence in Grand Junction, Colorado.  The FDIC filed the case as the receiver for failed lender Amtrust Bank. 

The following facts are alleged by the FDIC in its complaint: In January 2008, defendant appraiser Broom prepared an appraisal of the home for a proposed cash-out refinance being arranged by Clarion Mortgage and funded by Amtrust.  He appraised the property for $1,900,000.  The underwriting rules for a large-cash out loan required that Clarion obtain two appraisals and, thus, according to the FDIC, Clarion obtained a second appraisal from defendant appraiser Pace.  He also appraised the property for $1,900,000 according to the FDIC.  The FDIC alleges that the "two appraisals were not independent valuations of the Property" and that both appraisers erred by overstating the square footage of the home by counting a "detached theater room as part of the main dwelling's living area."  The FDIC alleges both appraisals misstated the "gross living area was 5,053 square feet, when it was actually 4,523 square feet."  What's not clear from the FDIC's vaguely written complaint is whether the second appraisal was a really a review that merely concurred with the first appraisal or whether it truly was an entirely separate non-review assignment.  The FDIC has misleadingly pleaded other complaints with regard to this issue. 

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Tuesday, November 19, 2013

Navigators Responds to Attention Focused on Its Recent Lawsuits Against Appraisers

Navigators Insurance Company has released a statement about its recent lawsuits against four appraisers it insured for E&O and about the attention the lawsuits have brought to coverage for "regulatory claims" in some of its E&O policies.  Navigators' lawsuits against the appraisers have been discussed in earlier posts on the Appraiser Law Blog.  This is Navigators' statement:

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Sunday, November 17, 2013

Navigators Sues More Appraisers to Deny Coverage under "Regulatory Claims" Exclusion

Updated on 11/22/13.  On November 14 and 18, Navigators Insurance Company sued three more appraisers to enforce "regulatory claims" exclusions in the E&O policies they purchased. These appraisers are in California and Nevada. Like the appraiser sued by Navigators in Florida on November 6, the new appraisers are being sued by the FDIC for professional negligence in separate cases filed about a year ago.  The objective of Navigators' lawsuits is to seek court confirmation of Navigators' legal position that there is no coverage under Navigators' policy for damages awarded against the appraisers to the FDIC, which is demanding about $500,000 from each appraiser, or any coverage for attorneys' fees and costs to defend the cases beyond $100,000.  The FDIC's lawsuits against the California and Nevada appraisers are scheduled to be ready for trial within the next few months; as a result, the appraisers now each have two lawsuits they must defend: the FDIC's case and Navigators' case regarding the insurance coverage.  The latest lawsuits can be found at this link on  Accompanying each lawsuit as an exhibit is the relevant appraiser's E&O policy from the Navigators program.

Navigators' lawsuits to deny the appraisers coverage again relate to the "regulatory claims" exclusion in many Navigators' policies -- a similar version of which can be found in some policies from General Star.  I've warned appraisers and also lenders and AMCs on this blog about the relevance of these types of exclusions in E&O policies for the last several years.  One of my first warnings came in 2011 when "regulatory claims" exclusions first started appearing in policies sold by General Star: "Some Appraiser E&O Policies Now Exclude FDIC or Other Regulatory Agency Claims," April 8, 2011 (that earlier also post provides detail about how to identify "regulatory exclusions" and where/when they may apply in specific policies).  We are now seeing those exclusions come home to roost in actual cases.

In my opinion, Navigators is technically correct in its legal position in each lawsuit about the wording of its exclusions for FDIC and similar claims in its policy.  Navigators' "regulatory claims" endorsement in each case says what it says: (1) the policy does not cover damages in any claim by the FDIC, (2) Navigators has no duty to defend an appraiser against an FDIC claim, and (3) the appraiser is limited to payment of $100,000 for attorneys' fees and costs in defending him or herself against the FDIC.  However, there are still big issues that the appraisers or FDIC may argue. First, Navigators has chosen an extremely distressing time for the appraisers to sue them over this insurance issue -- each of the appraisers is only weeks away from needing to be ready for trial with the FDIC.  The appraisers are facing these lawsuits by Navigators to deny insurance coverage right when they have the FDIC trials looming over them.  Navigators' legal battle about this issue crosses over a number of cases and, to a large extent, the appraisers unfortunately are pawns in Navigators' bigger battle with the FDIC, which is being coordinated across the country by high-powered Washington, DC law firm Wiley Rein LLP.

Second, the coverage problem with the policies for these appraisers relates to a bigger issue which goes back to when "regulatory claims" exclusions were first introduced by some appraiser E&O programs.  In 2010 and 2011, a popular E&O program for appraisers by insurer General Star was discontinued with the program administrator.  The General Star policies in that program did not have “regulatory claims” exclusions, but General Star undoubtedly realized that the FDIC and other regulatory agencies were more frequently suing over appraisal problems.  When that program was discontinued, most of the appraisers with old General Star policies were moved to new policies from both Navigators and General Star.  Some of these new polices (depending on the state with Navigators and depending on the date of coverage with General Star) now included "regulatory claims" exclusions for the first time.  Some appraisers have told me that they did not realize the change in their E&O because they never expected a policy for appraisal work would exclude coverage for claims by a banking regulator like the FDIC which is known to sue appraisers.  It is possible that the FDIC or appraisers have realized these issues and will now be raising them in response to the lawsuits filed by Navigators.

Navigators has released a statement about its coverage lawsuits against the appraisers.  That statement is included in a later post here.

"Regulatory Claims" Exclusions Are a Problem for Appraisers Beyond FDIC Lawsuits.

Appraisers and the clients that hire them need to know that "regulatory claims" exclusions are not just a problem for appraisers being sued by the FDIC about appraisals at the peak of the real estate bubble.  "Regulatory claims" exclusions are a problem relating to current appraisal work as well. For example, a popular appraiser E&O policy from General Star includes the following exclusion in policies sold to appraisers (if the "prior acts" date on the appraiser's policy is before 8/1/08):

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Thursday, November 7, 2013

Navigators Insurance Company Sues Appraiser to Deny Coverage Under "Regulatory Claims"/FDIC Exclusion

Update: Navigators has sued three more appraisers to deny coverage under the same "regulatory claims" exclusion discussed in the post below.  The more recent lawsuits are discussed in this later post

Yesterday, appraiser E&O provider Navigators Insurance Company filed a lawsuit in Florida against one of its own insured appraisers.  In its complaint, Navigators seeks to enforce a "regulatory claims" exclusion in the E&O policy purchased by the appraiser.  That appraiser is currently being sued by the FDIC in a separate lawsuit scheduled for trial next month. If Navigators prevails in its legal action against the appraiser, the appraiser will not have coverage under her E&O policy for any damages for which she is found liable to the FDIC at the upcoming trial and will also receive no further payment of defense costs.

The two cases provide an important look at current FDIC lawsuits against appraisers and at a significant hole in some E&O policies marketed to appraisers by some insurers.

The FDIC's Underlying Lawsuit Against the Appraiser.  In February 2007, the defendant appraiser allegedly appraised a condominium unit in Holmes Beach, Florida for $950,000.  The appraisal was for a $570,000 refinance loan arranged by defunct mortgage lender Taylor, Bean & Whitaker (TBW).  The funds for the loan came from a wholesale line of credit provided by Colonial Bank.  TBW allegedly assigned the mortgage to Colonial Bank upon origination.  Colonial Bank failed in 2009, and the FDIC is now serving as its receiver.  As a receiver, the FDIC has the right and ability to pursue losses it contends resulted from the negligence or other alleged wrongdoing of professionals or service providers to the failed lender, including appraisers.

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Wednesday, November 6, 2013

FDIC Guidance about New Exclusions in Liability Insurance Policies

I have written on this blog about the recurring issue of FDIC-related exclusions in appraiser professional liability (or E&O) insurance policies.  Today, an appraiser in Florida was sued by her E&O insurer to deny coverage for damages in an FDIC lawsuit against her based on such an exclusion in her policy.  I will write about that case in a future post (update: the post about that case is here).  The FDIC itself recently weighed in on the appearance of these types of exclusions in insurance policies.  That guidance is discussed below.

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Wednesday, October 16, 2013

Appraisal Management Company (AMC) License Bonds. Are They Working?

Current AMC Bond Requirements

Eighteen states now require AMCs to carry surety bonds to be properly registered to operate in those states.  The required bond amounts vary from $10,000 in New Mexico to $100,000 in Washington.  A list at the end of this post shows the required bond amounts in each state.
Are AMC Bonds Working?

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Wednesday, October 9, 2013

FDIC and "Regulatory Claims" Exclusions in Appraiser E&O Policies

Many appraisers don't know about or don't understand the new FDIC and "regulatory agency" exclusions found in many appraiser E&O policies.  Why is it relevant to know if your policy has an FDIC or regulatory agency exclusion of some sort?  The main reason is because the FDIC sues appraisers for professional negligence -- such lawsuits are discussed in prior posts: here and here.

How do you determine if a policy being offered to you contains an FDIC exclusion? 

Not all policies contain FDIC-related exclusions.  For some of the insurance providers below, it depends on the state or dates of the appraiser's coverage.  Other insurance providers do not include any FDIC or regulatory claims exclusions in any policies.  No policies sold by LIA in its appraiser E&O program contain any FDIC-related exclusions; and there are policies available in other programs such as Intercorp and FREA, which do not contain the exclusions.  For those policies which may include FDIC or regulatory claims exclusions, these are the provisions to look for -- they are usually added as endorsements to the policy:

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Monday, September 2, 2013

LIA's Liability Prevention Seminars in Indiana

I am teaching the seminars below hosted by the Hoosier State Chapter of the Appraisal Institute. The chapter has priced the classes very reasonably for both members and non-members of the Appraisal Institute. For example, the package deal for both seminars in Fort Wayne and Evansville is $45 for members and $55 for non-members. Also, appraisers insured with LIA receive up to $50 off their E&O for taking one or both seminars (see below for more information).

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Monday, August 12, 2013

Tax-Related Appraiser Liability Claims

In the last several years, we have seen more negligence claims relating to appraisals performed for tax purposes, especially appraisals for conservation easements, charitable deductions, and estate or gift tax.  The IRS is particularly focused at this time on scrutinizing appraisals of conservation and preservation easements submitted for the purpose of substantiating a charitable deduction by the property owner/tax payer.  Here, the property owner is generally proposing to record an easement over his property to protect a natural aspect or preserve historic features like a building facade.  The easement typically will be donated to and held by a charitable organization, such as a land trust or historic preservation trust, or by a government agency.  The appraisal will then be used by the property owner to claim a charitable deduction or other tax incentive.  The owner obviously will hope for a valuation that maximizes these benefits.

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Wednesday, August 7, 2013

Does USPAP Prohibit an Appraiser from Disclosing Confidential Appraisal Information to Defense Counsel? Handle the "Issue" in Your Engagement Agreement

[This post is adopted from a larger post about confidentiality.]

With respect to an appraiser’s confidentiality responsibilities, USPAP’s Ethics Rule provides: 
“An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: the client; persons specifically authorized by the client; state appraiser regulatory agencies; third parties as may be authorized by due process of law; or a duly authorized professional peer review committee ...”
Some appraisers and USPAP instructors -- but not this lawyer -- believe that USPAP’s confidentiality rule bars an appraiser from providing confidential appraisal information to the appraiser’s own legal defense counsel without specific client authorization. That position would leave the appraiser in the absurd position of having to ask for a client’s authorization to provide information to defense counsel while being threatened or sued by that very same client.  Even more absurdly, it would prohibit the appraiser from ever providing such information to defense counsel or even using the information for his or her own defense at all when the client no longer exists to ask for permission and the appraiser is being threatened or actual sued by a third party.  If followed, this reading of USPAP prevents the appraiser from obtaining informed legal advice and representation when faced with a liability action or disciplinary action and just about makes the appraiser defenseless.

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Monday, August 5, 2013

Appraiser Confidentiality: Loose Lips, Big Claims, USPAP Absurdity, and Subpoenas

Allegedly “Loose Lips” Cause a Big Claim.

A recent and relatively big appraiser liability claim involved a commercial appraiser’s alleged breach of confidentiality.  The damages paid to the plaintiff were significant.  According to the plaintiff’s complaint (my recounting of the facts here is simplified), a lender had engaged the appraiser to perform an appraisal for a construction loan to the developer of a shopping center.  Some of the information received by the appraiser included lease commitments from prospective tenants. The anchor tenant was a well-known retailer.  The appraiser completed the assignment, but for reasons unrelated to the appraisal, the lender declined to make the loan. 

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Friday, August 2, 2013

Foolishness: Appraiser E&O Information Attached to Appraisal Reports

We see it again and again: AMCs and lenders demanding that appraisers attach E&O insurance information to the back of their appraisal reports.  It's not just a bad idea for

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Friday, July 19, 2013

Appraisal Expert and Non-Lending Appraisal Assignments -- Liability Prevention CE Seminar, July 25, 2013, Santa Barbara, CA

I am teaching the seminar below in our hometown – Santa Barbara, CA.   It is hosted by the Southern California Chapter of the Appraisal Institute.   Appraisers who attend may become eligible for an E&O discount as mentioned below (please see details below).

This is the seminar – it’s a new topic:

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Wednesday, June 5, 2013

Washington State Raises AMC Bond Requirement to $100,000

As a direct result of the recent financial failure of appraisal management companies like Evaluation Solutions and ES Appraisal, the State of Washington recently enacted a new law raising the state's AMC bond requirement from $25,000 to $100,000.  As of July 28, 2013, all AMCs registered in Washington will be required to carry a bond in the new amount.

One of the purposes of the bond is to provide security for payments owed to appraisers by AMCs.  If an AMC fails to pay an appraiser in accordance with Washington's requirements, the appraiser then may have a claim against the AMC's bond.  The bonds also secure payment of fines and penalties that may be ordered by the state against an AMC.  This bill resulted from efforts of the Appraisers' Coalition of Washington.

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Wednesday, May 22, 2013

Overtime Lawsuits Continue to Spread Among Valuation-Related Companies -- Interthinx Becomes the Latest Defendant

First it was Integrated Asset Services.  In February, I wrote here about three employee overtime class actions affecting the Colorado AMC filed on behalf of "timeline managers," "valuation managers" and "quality reviewers."  Then it was LandSafe Appraisal.  In April, I wrote an article about a newly filed overtime lawsuit by staff appraisers against that company. 

There is definitely now a small wave of overtime litigation under the federal Fair Labor Standards Act (FLSA) affecting businesses in valuation-related fields.  The industry has become an easy target for such claims because of the tendency of businesses in this industry to classify their line staff, whether they are doing appraisals, quality review work or analysis of mortgage files, as professionals or administrative management and thus exempt from overtime.  The problem is that these exemptions under the FLSA often cannot be supported for such work functions.

The latest industry defendant to be named as a defendant in an alleged overtime class action is a company called Interthinx, Inc., which describes itself as a "provider of comprehensive risk mitigation solutions focusing on mortgage fraud, collateral risk and valuation, regulatory compliance, forensic loan audit services, loss mitigation, and loss forecasting."  This lawsuit was filed in federal court in Colorado on May 9 by a current employee Celeste Shaw, who performs mortgage loan auditing in Interthinx's Colorado Springs office.  Her attorneys seek to go forward with the case as a class action on behalf of an undetermined number of other employees throughout the U.S. who perform similar functions.  She alleges that "the estimated damages involved in these claims will exceed $5,000,000" among the potential class members.  On behalf of that class, she alleges in her complaint:

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Tuesday, May 21, 2013

LIA's Appraiser Liability Prevention CE Seminar in Phoenix on June 12 (and E&O Discount)

Based on our claims for the last 5 years, Arizona appraisers have more liability losses than appraisers in any other state. On June 12, in a 4-hour CE seminar hosted by the Arizona Chapter of the National Association of Independent Fee Appraisers (NAIFA) in Phoenix, I will explain why that is the case and also inform appraisers about steps they can take to minimize that liability risk. Appraisers who attend also become eligible for a premium discount in LIA's E&O program.

This is the seminar:

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Monday, April 15, 2013

Another Overtime Class Action Filed Against an AMC

A lawsuit filed last week by a former staff appraiser against LandSafe Appraisal Services, Inc. exemplifies the overtime liability risk faced by many appraisal firms and management companies.

In February, I wrote that overtime lawsuits by appraisers present a genuine risk to many appraisal firms and AMCs.  In that article, I explained some of the special issues relating to whether appraisers properly can be treated as "exempt" employees for purposes of overtime compensation.  The real-world risk to an appraisal firm or AMC is that a staff appraiser will file a legal action alleging that he or she worked more than 40 hours in a workweek, perhaps for a period of years, and will demand the unpaid overtime due plus penalty damages, interest and attorneys' fees.  For larger firms, there is also the threat of a collective action under the Fair Labor Standards Act (FLSA) -- the overtime equivalent of a class action.  Such actions could be filed either by employee-staff appraisers or potentially by appraisers who contend they were misclassified as independent contractors (i.e., "1099" contractors). 

It looks now like we are seeing a small wave of overtime litigation in the valuation industry.

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Friday, February 22, 2013

Non-Lending Appraisal Liability CE Seminars in Sacramento, San Diego, Petaluma and Portland, OR

How do appraisers who appraise conservation easements get sued? Do review appraisers get sued? What special language should be considered for engagement letters for different types of non-lending work? These are the kinds of questions answered in the CE seminar I am teaching in Sacramento on March 12, 2013.

The class is entitled "Liability Issues for Appraisers Performing Litigation and Other Non-Lending Work" -- or, in other words: “Staying out of the courtroom unless you’re being paid to be there.”

The class on March 12 is hosted by the REAA's Sacramento Chapter. LIA Administrators & Insurance Services is the educational provider. The cost is $45 for REAA members and $75 for non-members. Appraisers insured by LIA receive a discount on their E&O premium of either $25 or $50 for completing the class as explained further below.

Registration for the March 12 class in Sacramento is through REAA and further information about time and location are at this link: Registration

Other future dates of this class are -- registration for these classes is with each organization below:

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Thursday, February 14, 2013

Read That Agreement Before You Sign or Leap

I recently ran across the provision below in a new contractor agreement between an AMC and its panel appraisers, when one of LIA's insured appraisers asked me to take a look at the agreement.  The contract contained the average indemnification provision found in most unfair AMC contracts in which an appraiser promises to defend and reimburse the AMC for "any and all liabilities, damages, costs and expenses (including all legal fees) arising out of or relating to any claim, action, suit, complaint, liability, damage, or other proceeding" relating to appraisals done by the appraiser and a long list of other things.

But then the contract got a little more crazy:

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Friday, February 8, 2013

Overtime Lawsuits Affecting Appraisal Firms, Lenders and AMCs

Under the federal Fair Labor Standards Act (FLSA), employees in most types of businesses are required to be paid overtime at 1.5x their hourly rate if they work more than 40 hours in a seven-day workweek, unless they are properly classified as "exempt."  Recent cases show that this law presents a genuine liability risk to businesses in the valuation industry. 

The risk is that an employee who is misclassified as "exempt" and not paid overtime will later file a legal action alleging that he or she worked more than 40 hours in a workweek, perhaps for a period of years and will demand all of the unpaid overtime, penalty damages, interest and attorneys' fees.  This isn't just a threat for big firms. Even mom-and-pop appraisal firms employing just one or two appraisers have been dragged into FLSA overtime lawsuits by former employees.  In addition, for larger employers with multiple employees performing the same job functions, there is the threat of a collective action -- i.e., the equivalent of a class action by employees under the FLSA.

A Mom-and-Pop Situation.  In one case, Urnikis-Negrov. American Family Property Services, the appraisal firm was owned by a husband and wife -- Mr. and Mrs. Lash. The husband was a certified appraiser and also a church pastor. Through their firm, the Lashes employed two of their congregation's members -- who were brother and sister. Ms. Urnikis-Negro -- the sister -- was employed by the Lashes to handle overall quality control and to review the reports being prepared by Mr. Lash and other appraisers. During her employment, she became a trainee appraiser (the court referred to her as an "associate appraiser). She received an annual salary of $52,000 -- more than Mr. Lash paid himself. The trial court described her primary job duties as follows:
Urnikis-Negro's work in this regard largely consisted of that of a glorified proofreader. Her responsibility in reviewing the appraisal reports was to make sure that all the necessary parts of the report form were filled in, the form did not contain facially apparent errors, and it did not have internal inconsistencies.
Because of the large volume of appraisal work during the height of the real estate bubble, the appraisal firm was quite busy and Ms. Urnikis-Negro frequently worked more than 40 hours per week, but there were no records of the actual time worked. When work slowed in December 2005, the Lashes terminated Ms. Urnikis-Negro. The work slow down probably had something to do the fact that the State of Illinois had suspended Mr. Lash's appraisal license in May 2005. Ms. Urnikis-Negro, however, landed on her feet and quickly found a new job with a bank. She then sued the Lashes and their appraisal firm for unpaid overtime.

The trial court had no problem concluding that she was not engaged in professional or administrative work based on finding that her work was really glorified proofreading, and the court concluded she was not exempt.  Because there were no actual time records, the court estimated the overtime based on testimony. In the end, the court awarded her $24,866 in unpaid overtime and penalties, plus $95,130.71 in attorneys' and costs. Ms. Urnikis-Negro actually appealed the damages award contending that her damages were under-calculated and should have been $111,787.50, but she lost that appeal.

A Recent Case Against an AMC.  Let's turn to a case filed last year against an AMC/lender services company in Colorado named Integrated Asset Services.  Like the Urnikis-Negro case, this case does not concern true appraisers.  It concerns "appraisal managers" at a large AMC, who were tasked with communicating with appraisers about appraisal orders and performing quality control reviews of the reports submitted.  Keep in mind, of course, that the allegations here come from the plaintiff's complaint and the allegations very well may not be accurate.  If the allegations are true, however, my personal opinion is that this will be a hard case for the AMC to defend - for the same reasons that the mom-and-pop appraisal firm in Illinois could not defend treating a "glorified proofreader"/trainee as exempt in the Urnikis-Negro case.

In her complaint filed in federal court in August 2012, the plaintiff "appraisal manager" seeks to litigate the lawsuit as a class action on behalf of all "appraisal managers" at the AMC:

This is the plaintiff's description in her complaint of the alleged job duties of an "appraisal manager" at IAS:

The plaintiff then alleges that she personally worked 50-70 hours per week and was never paid overtime:

We'll see how the case works out.  It could have significant ramifications for the legal risk faced by other AMCs or firms treating similar valuation-related positions as exempt.  It's not so much that legal precedent will be established but rather that this case may fuel more litigation about overtime issues in the valuation industry.   In fact, IAS itself is facing two other alleged class actions seeking overtime.  One of the cases is filed on behalf of "valuation managers" who handled BPOs and other agent-performed work.  The last case seeks unpaid overtime on behalf of "reconciliation coordinators" who handled a process for accepting or rejecting valuations used for REO properties or default dispositions.  This particular case was filed by a former employee of IAS who worked for the firm for over 10 years and ultimately held the title "Vice President of Reconciliation and Appraisals" at the time she lost her job in August 2012 -- about a month later, she filed the class action complaint for overtime.

I do believe that many appraisal firms and AMCs may be at risk for similar litigation involving overtime issues and that these three cases could lead to future additional litigation against other firms.

The complete complaints in each case are available on at this link.

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