If you’re an experienced property appraiser, you may be ready for a new challenge or want to bring in additional income. Perhaps you’ve thought about becoming an appraisal expert witness but aren’t sure what it entails or whether it’s even in demand. To help you determine if this is the right step for your career, we’re looking at the types of appraisal witness assignments, the benefits, and how to get started.
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Appraisal expert witness vs. fact witness
First, appraisers may be called to be an expert witness or a fact witness. A fact witness is someone who testifies only on their personal knowledge of the circumstances and events that are relevant to the case. They are not allowed to give opinions and may simply provide truthful testimony regarding elements of the case. If you’re called as a fact witness in your role as an appraiser, this may mean describing an appraisal you completed, or something related to the property you appraised.
An appraisal expert witness is allowed and expected to share their opinions. You would use the facts of the case as you know them along with your experience and specialized knowledge to provide an opinion to the court. Your testimony could also help the jury to understand the technical elements of your testimony and your reasoning behind your insight.
Types of expert witnesses
In addition to fact and expert witnesses, there are several types of cases in which an appraiser’s knowledge and opinion may be necessary.
In a case of eminent domain when a local, state, or federal entity wants to use land for public use, they are required to provide fair compensation. If the case goes to court, an appraiser may be called as an expert witness. 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.
When two parties are dividing assets in a divorce, an appraiser may be asked to provide their testimony and opinions on the value of the home in court.
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. 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 expert witness to testify in court.
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.”
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.
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.
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.
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 an appraisal expert witness to determine the impact of an error in a legal description or overlooked encumbrances in the title insurance policy.
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.
Benefits of becoming an appraisal expert witness
Now that you know a bit more about what this role entails and the types of cases you may be a part of, let’s consider the benefits of stepping into this role.
While compensation for an expert witness varies depending on multiple factors, including time and effort involved and the contribution on the case, it can still be a significant boost to your usual income. This can be especially important when the real estate market is slower to help fill in the gaps.
Building your reputation
Acting as an appraisal expert witness helps you build authority and improve your reputation as it shows that you are a trustworthy expert with highly specialized knowledge.
Bringing in more clients
As an expert witness, you have the opportunity to expand your network beyond the usual circles. This can open the door to new clients and help you grow your business.
Becoming an appraisal expert witness
Becoming an expert witness is not something that happens overnight or at the beginning of your appraisal career. This is a path for established and experienced Certified Residential and Certified General Appraisers. Taking continued education courses for appraisers (CE) to build your knowledge, especially in ethics and specialized properties is key to being able to successfully help your clients while maintaining your ethical standards. Consider:
- Introduction to Expert Witness Testimony for Appraisers: To Do or Not to Do
- Fundamentals of Expert Witness Testimony
- Divorce and Estate Appraisals: Elements of Non-lender Work
At McKissock, we have a wide variety of CE courses to help you expand your knowledge so you can meet your career goals, whether that’s upgrading your license, finding a new specialization, or becoming an expert witness. Check out our CE Membership for unlimited access to hundreds of appraisal courses.