How to Become an Appraisal Expert Witness

From the legal terms one uses in different court cases to surviving a cross-examination – Would you be prepared for expert witness testimony. We sat down with Steven R. Smith, MSREA, MAI, SRA Appraiser and Expert Witness to discuss his upcoming webinar “How to become an Appraisal Expert Witness” to help you answer that question with a resounding “Yes!” Steve will present insight into courtroom testimony, work file techniques, critical steps to ensure USPAP compliance, and other knowledge he has acquired over the years. This webinar will take place on Tuesday, July 9, 2019 at 2:00 PM.

Buzz: What is your experience and background as an expert witness?

Steven: Before I was an appraiser, I was a loan officer, loan manager, and then a real estate agent and sales manager. A buddy of mine in the Jaycees was a young lawyer in our building. He told me one day that If I were to become an appraiser, he could give me a lot of expert witness work. It sounded good. Three months later, I was working as a trainee. One month later, he hired me on a case. Six months later at the trial, the cross examination was withering. The case could have been lost, except the other expert did something really bad. I learned in that one instance that you could not get by doing appraisals for legal cases with the same reckless abandon used on the three per day the bank demanded of us. That was in 1976.

Over the decades, I have worked on many kinds of cases from divorce, specific performance, judicial foreclosure, bankruptcy, professional liability, a wide range of civil cases, and criminal cases involving real estate frauds, mortgage frauds, appraisal frauds, and eminent domain. I have also worked on several class action suits which involved a range of appraisals. Sometimes there would be dozens of properties, and other times, there would be hundreds of properties and/or appraisal reports to review.

Buzz: What sort of appraisal work requires expert witnesses?

Steve: Any time there is real property involved in a lawsuit, an appraisal might be needed. They can be civil or criminal cases. Anytime a property is held in a Trust and one of the owners dies, an appraisal is needed for what amounts to the last tax filing, it is called a 706 form. In one of these cases, where two couples owned a property, I have appraised it four times, years apart. Sometimes these involve not just the residence, but the 2nd home, shopping centers, industrial buildings, land, etc. I got a call just today from a woman who is responsible for a 501c non-profit that needs an appraisal every five years for the IRS.

Buzz: For someone just starting without any experience, what is the best way to begin?

Steve: There are courses offered by the professional appraisal associations and the Right of Way association that can help. I would suggest first, to take an Ethics Course either from the Appraisal Institute (AI) or another source. My first ethics course was in college, then the AI, and then in graduate school. Then, take advanced course work from the AI or other professional associations. Learn to embrace and employ good valuation processes and procedures. Learn the various definitions of value used in different kinds of court cases. Here is what one needs to learn first: Our job is to do our job to the best of our abilities, employing good processes and procedures including due diligence. And then, if necessary, give deposition testimony or court testimony, and leave. Our job is not to help the attorney row the boat, so to speak, to win the case. We should never be an advocate to try and help win the case. There are plenty of appraisers who play the role of advocate, some with multiple designations from multiple professional associations too.

Buzz: Courts can be a source of uneasiness for many. Will there be techniques and tips given that could help combat this or prepare for it?

Steve: Yes, first listen to the question completely, then breathe deeply before answering, and then take time to do so, do not blurt out answers even when you know them. Do this so when hard questions come and you need time to think so it won’t look like you are stumped. Also, you must always tell the truth – do not slant things one way or the other. I consider giving testimony an opportunity to speak up as the professional that I am. Sometimes this includes providing educational information so that the judge or jury might better understand the answer. And finally, don’t be afraid. When it comes to valuation, you are probably the most knowledgeable person in the room. Attorneys take one class to get their law degree and it’s called “Real Property.” They have never had to take an appraisal course. I have taken six real estate courses to get my BS degree, 14 more to get a MS in Real Estate Appraisal, and as many more from the AI, SREA, IRWA and others. I know I know more, and so should you.

Remember too, if you took a course, the other side could actually use the textbook to cross examine you. I have read cases where the appraiser testified he had taken courses from professional associations. When asked if they were good courses, he answered yes. Then, the lawyer brought out the text book and asked him to read the process of the Market Data Approach. When finished, he was asked why he did not follow the steps as outlined in the book. Gulp.

Buzz: What do you find is most difficult for this type of work and how do you overcome it?

Steve: The difficulty starts with needing to understand that lawyers are paid to be advocates for their client since that is their job. Since we are not, we certify to our neutrality. There are many kinds of court cases; each venue may have a different definition of value and different rules of evidence. It takes time to learn these. Learn to ask which definition of value is to be used on each new case. Read the USPAP Preamble, Ethics Rule, Competency Rule, and Scope of Work Rule again, do it today, and ask if our efforts serve the Public Good, if they are Objective and Unbiased. Never slant a value to favor the client. Never lie.

In the initial interview or phone call with a new attorney, I have the “I am just a Neutral” talk. This means letting them know at the outset that you do not need or want to know their theory of the case, just in case you do not take the assignment and the other side contacts you. I often tell a new attorney that if they let me do my job objectively, without bias to the best of my ability, I can defend it much better than if I slanted the value to favor the cause of the client. Then, if the value estimate does not serve their needs, they are free to go get an appraisal advocate. By doing this, at least they know the truth about the most probable value for negotiating purposes.

Sometimes the value estimates between the appraisers can be huge. I had a class action case against a public utility whose transformer exploded and caused a firestorm that burned down an entire neighborhood. Their expert testified that if the houses were rebuilt the next day, there would be a 6.7% loss in value due to the neighborhood and properties being tainted in the buyers mind: I testified it would be between 50-100%. When my attorney heard the other experts opinion, he told me later that he said to their lawyer  “I would be happy to put your expert on the witness stand in front of a judge or jury any time you are ready to go to trial.” The case settled that afternoon.

Holding oneself out as merely a neutral, objective, unbiased professional may come as a surprise to lawyers since many are used to appraisers being Advocates. We are always at choice, so, bring the issue up at the beginning. It is a slippery slope once one starts trying to help win a case by slanting values one way or another. We all have reputations. I have cultivated mine as a neutral. We are all have a choice in how we want the world to see us. I am just fine with that title.

Buzz: Why should all appraisers attend this?

Steve: This webinar is a four hour seminar I teach titled “Easing Into Expert Witness,” condensed down to 45 minutes. It was created to help the loan appraisers understand that there is a larger world of appraisal work out there. Residential appraisers in particular are like someone with a single shot pistol by doing just lender work. When it dries up, they will have nothing. In todays’ environment, the GSE’s are on a tear to eliminate appraisers as much as possible. Tens of thousands will find their work volumes disappear. Learning to do work for litigation cases simply involves more due diligence for the most part, not new processes and procedures. By that I mean, embracing and employing the good appraisal processes and procedures we certify to every time we sign our USPAP Certifications.

Legal work is steady, not subject to the interest rate market, or underwriting standards tightening. It may not be high volume from any one client, but it helps one build a recession proof practice. I would rather have a  dozen different kinds of cases I could work on, than just one doing lender work, which can dry up with the stroke of a pen.

We want to thank Steve Smith again for taking the time to discuss his upcoming webinar, “How to become an Appraisal Expert Witness.” This webinar will take place on Tuesday, July 9, 2019 at 2:00 PM.

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About Irimar Waters

Irimar Waters
Irimar Waters is the Media Director and Editor for Allterra Group. She is responsible for digital and print media marketing, managing all social media accounts, collaborating with authors on articles, and editing for Appraisal Buzz Magazine. Her literature background began at Frostburg State University where she studied professional writing and the Spanish language. She graduated in May of 2017 with over 500 credit hours dedicated to internships relating to writing, editing, and marketing. Now with recent experience as a Senior Editorial Assistant and Digital Journalist, Irimar has over 6 years of related and hands-on experience.

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