February 2, 2020 – Recently, I was asked what I thought about appraisal reports that contain a limiting condition that says the appraiser’s liability is limited to the appraisal fee. When I first saw this in a report several decades ago my first reaction was to laugh. As they say, nice try, but no cigars.
I have seen financial institutions deal with this in two different ways. Some banks prohibit appraisers from including this condition in reports done for them. Appraisers then have the choice of complying or not doing work for that bank or credit union.
I went the second route and just ignored the condition. i.e. I let appraisers put it in reports done for the banks I worked at. I knew that it would not hold up in court, so it is a non-issue.
Another bank that contacted me about this issue is working on wording to place in their engagement letter to prohibit use of this condition. They are running it by their counsel. If they are willing to share it with me, I will update this post and include it here.
As an aside, I recently had one of my appraisal reports reviewed by a client I must keep confidential. They flat out said that no limiting conditions are needed and for me to take out all of the general assumptions and limiting conditions. After picking my jaw up off the floor, I mulled it over for a day and came to the conclusion that I am fine writing reports without these items. At least for this client. I am still mulling it over for other clients.
Limiting conditions. Who needs limiting conditions:)