There are many types of litigation where real estate appraisers can be helpful in providing evidence to the court. Many of these will require engaging the appraiser to perform an appraisal specifically for the case. Others will simply rely on a previous appraisal and call the appraiser to testify about it. Here are twelve types of expert witness assignments for appraisers.
These cases generally require a special approach to the appraisal process stipulated in federal or state statutes or regulations, so the appraiser would not rely on a past appraisal.
Although these often are considered fairly simple assignments, the appraiser is very likely to end up in court on the witness stand because of the potentially adversarial relationships in divorces.
How are divorce appraisals different from standard mortgage lending appraisals? Find out in our CE course, Divorce and Estate Appraisals: Elements of Non-Lender Work.
These expert witness assignments are similar to the “before value” appraisals in condemnation cases. One of the main concerns for the appraiser in these cases is payment of the appraisal fees. Fees need to be approved by the court, and this approval should be issued before you begin the assignment.
Appraisals are required at several points during the foreclosure process. An appraiser may have multiple engagements for the same property during the process. If a junior lien holder or underlying fee owner asks the court to set a minimum bid that would protect them from loss in the senior lien foreclosure, the court may require an appraiser to assist in setting the minimum bid price. Deficiency judgment action could also create a need for an appraiser to testify.
5. Construction faults
These cases often require appraising the damage caused by incorrect construction techniques or similar problems. These appraisals often require careful analysis of the “cost to cure.”
6. Appraiser negligence
When an appraiser falls short of USPAP standards and is called before the regulatory agencies, another appraisal is sometimes required to measure the extent of the original appraiser’s misconduct. These assignments generally involve appraisal reviews rather than original appraisals, but still are considered litigation related assignments.
In non-mandatory states where some appraisal assignments can be done without an appraiser license, an appraiser negligence action may be outside the jurisdiction of a regulatory agency, but still brought in a civil action by the parties. USPAP can still be applied because it is the “generally accepted standard.” The expert witness appraiser, of course, would still be required to follow USPAP in his or her review of the other appraiser’s work and in the appraisal review report and testimony.
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7. Tax appeal
Typically, this would be for local property tax appeals. You must remember that USPAP prohibits an appraiser from using a contingent fee structure in any “appraisal practice” assignment. If the appraiser is providing any services that would fall under that definition, the fee structure cannot be contingent on the outcome of the appeal.
8. Income tax (IRS) issues
This could be for estate or probate cases, and often involves determining a retrospective market value if a taxpayer neglected to obtain an appraisal when property was inherited. The appraisal activity could also be to establish a value for a tax deduction or in response to an IRS audit.
Retrospective value opinions typically involve more work and research than current value opinions. The appraiser should be cautious about accepting appraisal assignments where the IRS is involved. If the IRS reviewer rejects an appraisal, there could be significant restraints on any future appraisal work for the IRS or other federal government agencies.
When entities are co-owned, and the co-owners decide to separate, disputes often develop. Appraisals are then required to assist the owners, and eventually the courts, to determine the value of the property.
10. Insurance claims
These appraisals generally take the same approach as condemnation appraisals. Generally related to a casualty on the property, the insurance company and insured may dispute the amount to be paid on the settlement and require an appraiser to determine the impact on value due to the casualty loss. Sometimes a title insurance company will need appraisal services to determine the impact of an error in a legal description or overlooked encumbrances in the title insurance policy.
11. Guardianship/Trustee matters
Guardians and trustees need appraisals to document that they have made prudent decisions regarding the acquisition or disposition of property in trust. When the beneficiaries dispute the action of the trustee, litigation can develop, and the appraiser may be required to testify.
These cases often develop from disputes in a purchase and sale of real estate where fraud is alleged or when misrepresentation occurred. These expert witness assignments are usually similar to assignments to appraise a partial taking in a condemnation case using the before-and-after rule.
As shown in the above non-exhaustive list, litigation appraisal assignments can come from many different sources. The approaches to the appraisal problem will be varied and the complexities may be minor or major. There is substantial demand for litigation support services to the legal community.
Many appraisers prefer not to get involved in litigation related assignments because of the higher demands and the adversarial nature. Therefore, the appraiser who is prepared to accept these expert witness assignments can see an increase in both income and professional image.
Are you interested in serving as an expert witness appraiser? Learn more about these types of assignments in our top-rated CE course: Introduction to Expert Witness Testimony for Appraisers: To Do or Not to Do.