As real estate appraisers, we are responsible for creating fair and accurate assessments of properties’ values. It’s an enormous responsibility that’s often put at risk by small errors, oversights or misstatements in appraisal reports. Although mistakes will inevitably happen, steps can be taken to mitigate risk and limit any chance of litigation from occurring.

Error and Omissions (E&O), also referred to as professional liability insurance, is not only beneficial to any business; it’s often required by regulators who regulate appraisal work. E&O insurance protects real estate appraisers against financial loss caused by negligence or inadequate work performed, with only a portion of claims ever reaching a settlement amounting to financial damages; attorneys’ fees associated with defending yourself in court may quickly add up over time.

Residential appraisal E&O claims typically arise when borrowers disagree with the value attributed to their property by an appraiser, leading them to file E&O lawsuits against that appraiser. Most disputes can be settled through using comparable sales to support what the original appraiser suggested, and holding discussions between parties involved to ascertain if that amount is acceptable to both sides.

However, commercial appraisals can be more complex to defend against than residential ones. Conflict may arise over differences with the market or scope of work, bias or discrimination in reporting or perceived bias or discrimination in reporting. To mitigate such risks, appraisers should maintain well-documented work files as well as selecting language in their reports/neighborhood descriptions carefully so as not to mislead viewers or misinterpret what they read as bias. They should also consider taking Fair Housing training and avoid discussions of personal nature with homeowners/borrowers so as to reduce such accusations of bias.

Since E&O claims often involve misunderstands with values, another source of complaints about appraisers can come from “personal” matters as well. This may range from attire choices and client communication style issues, for instance an appraiser received a lawsuit because he or she wore shorts on an inspection day that his or her client found too hot.

No matter if a case goes to trial or is settled outside court, appraisers can expect significant legal costs and income losses related to defending themselves and any possible lapses in coverage could prove financially ruinous for their firm.

Real Property Solutions (RPS) provides real estate appraiser e and o insurance that is both comprehensive and cost-effective, available via our secure e-commerce website. Our policies can be customized to meet the unique requirements of an individual appraiser or multiple appraisers working at one firm. Our programs feature Claims Expense Outside the Limits coverage as well as various deductible options in order to provide a balance between premium costs and out-of-pocket expenses in case of an incident; additionally we also offer combined policies which cover real estate appraisal professionals against both real estate as well as general liability exposures.