Errors and Omissions Insurance for Real Estate Appraisers
Evaluating a home or property to estimate its market value is an important job, especially in today's booming real estate market. Real estate appraisal, unfortunately, also has its risks, namely the threat of a lawsuit by a dissatisfied party in a real-estate transaction. Errors and omissions insurance (E&O) protects appraisers form this unfortunate reality.
What is appraisers' errors and omissions insurance?
- Appraiser E&O insurance covers losses and legal expenses generated by client claims of error, omission, or negligence during the appraisal of a residential or commercial property.
- Some suits against appraisers occur when a lender is forced to foreclose on a property. In this situation, lenders sometimes sue multiple parties involved in the transaction, including the appraiser.
- Another common cause of appraisal litigation: misappraisal, particularly, the undervaluing of a property. This can be due to appraiser error or a general decline in property values.
Why is appraisers' E&O insurance necessary?
- Appraiser errors and omissions insurance is a prerequisite to doing business with certain third parties.
- General businessowners policies do not include professional liability insurance, covering losses and legal expenses resulting from client claims of error or negligence.
- Even if a client claim is baseless, appraisers often must still mount a legal defense. Without appraiser E&O insurance, this can be very costly.
What else should I know?
- Appraiser E&O insurance premiums will vary, depending on how a carrier rates prospective policyholders (for example, by number of appraisals, appraisal type, sales or income).
- When shopping for E&O insurance, inquire about the maximum coverage per claim and per year.