Appraisers and Their Need for E and O Insurance

All appraisers need errors and omissions, that’s e and o insurance, simply because they provide a professional service for people in the market to buy or sell a home. Sellers are often much easier to deal with, since they decide how much they’re willing to sell their property for and whether or not the price is negotiable. Buyers, on the other hand, can be more difficult because they need to be aware of the condition of the house, and that cannot always be determined in a walk-through.

Make sure to get it in writing

As an appraiser, when confronted with an angry buyer, you must use your judgment to decide whether what you’re concerned about could possibly lead to a claim. Is the person just asking for information regarding their purchase, or asking for clarification on some issue or are they behaving in an angry manner and being accusatory? If the phone call is threatening, you should ask the caller to put their complaint in writing. This helps to tell you exactly how serious the situation might become.

If things become serious, and they do put their complaint and/or demand in writing, you should definitely inform your insurance company about the situation. You may receive their complaint letter and think the allegations are complete nonsense and a waste of time. You should still let your insurance company know about it. The company should be informed about all accusations and not just the ones you deem to be valid.

For example, the appraiser decides that the subject property’s condition falls under C2, which simply means that the improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. It’s not reasonable to assert that a borrower can rely upon the appraisal for information about the property’s condition because that is not the purpose for which the appraisal was prepared.

The fact is that the appraiser is not a home inspector and the appraisal report is not a home inspection. The appraiser only performs a visual observation of accessible areas in and around the property and the appraisal report cannot be relied upon to disclose actual conditions and/or any existing defects in the property.

Regardless of what the appraisal does or doesn’t reveal, in terms of what underlying concerns that a buyer might have, e and o insurance is the only way that an appraiser can defend against accusations of misrepresentation or errors and omissions in the commission of their work.