AppraisalPort's New & Improved "Users Agreement" Released

[Brian Davis]

The following was posted on Appraisal Scoop and reposted here for further discussion:

On September 12th, Appraisal Scoop reported that "The new AppraisalPort® User Agreement scheduled to be effective September 13, 2008 has been deferredto accommodate further industry comments. The current AppraisalPort Subscription Agreement shall remain in effect until further notice."

That deferral was presumably the result of a heated debate over the renewed awareness of the "Hold Harmless" clause that the User Agreement contained.  Here's what the original "Hold Harmless" clause looked like . . .

On November 10, 2008, AppraisalPort issued the following memo to registered appraisers:

"This message is to notify you that the AppraisalPort® User Agreement has been updated and the amended version will become effective for all users on December 13, 2008. Your valuable feedback was taken into consideration in developing this version, which you may view by clicking here. Upon your first login to AppraisalPort after the effective date, you will be asked to acknowledge that the AppraisalPort User Agreement has been amended before you can gain access to your AppraisalPort account."

In contrast, here's what the *New* Hold Harmless clause looks like . .

 

What do YOU think?!   Does changing the language from "Subscriber" to "User" effect the appraiser's liabililty?   Will this effect how the E&O insurance companies view our liability. 

[Dave Ehrnstein]

I have read Appraisal Port's new EULA, and it is really awful from any appraiser's perspective.

It includes "Appraisal Port may...capture certain data about USER's account, ... performance data, operating data, observations about product type, pricing and other data." This data, collected out of your reports, may be used "within one or more products or services" sold or provided by appraisal port without the appraisers consent.

Other goodies include:

The use of appraisal port is at user's own risk.

"FNC does not endorse, warrant or guarantee any product or service offered through appraisal port..."

"User shall indemnify Appraisal Port, ... defend and hold them harmless from and with respect to any liability, damages, ... losses, or claims which may arise..."

"FNC's entire liability, and user's exclusive remedy ... shall be the termination of this agreement."

Limits claims window for to one year

Appraisal Port is "entitled to equitable releif" in court against you, but you can only stop service against them.

The Arbitration clause is back again, of course!

Etc.

This agreement is certainly something I'd refuse! Appraisal port wants to be able to play ball, but only on their own field! Please, let me take your lunch money, and never have to pay it back!

Dave Ehrnstein
Appraisal Mastery Center

[Tim Ferguson]

I would not have a problem with the agreement, if they do just what they are suppose to do, A PORTAL!
If I had something in writing that they do not touch the appraisal what so every, then I am ok with it. But, of course that will not happen and we know it does not happen.

[Dave Ehrnstein]

As I read it (I'm an appraiser, not a lawyer), the new agreement says pretty clearly that they are entitled to do what they want with it. They are NOT agreeing to be "A PORTAL" as they were originally supposed to be.

They can touch or use your appraisal almost however they want, as long as they don't identify the data as coming specifically from your report.

This means that you are being robbed, in my opinion.

Dave Ehrnstein

[Pete Singleton]

Actually we’re paying $7 to $13 an appraisal to get robbed. I wish someone would pay me to rob them and agree to give me a get out of jail free card. Then I could afford that apartment building on Park Place.

[Workbox]

I think that they rearranged the wording, but is still the same as the old one. Many are still waiting on what the E&O's say, but there have been some other items of note to be of concern.

[Thomas C. Linsin]

I am a regular AP user and can not afford to let those clients go because I don't like their user agreement. I sent an email to "general counsil" and indicating that I was not a lawyer and that I do not fully understand the document. I have requested that they respond to me with an outline of the agreement in "laymens terms". I do not expect a reply. I have saved a copy of my communication to them for future reference - as a CYA if necessary.

It would be interesting if we could get a movement by all with a similar request.

[Paul W.]

From a recent post on another forum by a very respected Oregon appraiser (released by permission), I think it relevant for your consideration:

"To All,

I read through the “New” replacement AP “user” agreement quickly and identified a series of items, that at first glance, I have issues with.

My first stumbling blocks are hit in the last sentence of Section Two. A laundry list of things are undefined and I personally have no idea what they are or mean. I can only guess what they are or mean.

What what does the following mean?

Performance Data
Operating Data
Observations about product type
pricing and OTHER data (what is “other” data?)
What does data “in aggregated” mean?
Ok, no user data will be disclosed to “unaffiliated” third parties, but WHO ARE THE AFFILLIATED ONES????? What is “User Data?”

Section Eight regarding proprietary rights, confidentiality, and indemnification:

In this section I have no idea what “the information” is or refers to. Rather difficult to hold something in confidence when you have no idea what that something is, or to advise your employees of things that are “secret” only what those things are is a mystery.

Next, and this is “The Biggie,” we slam right back into that nasty word “indemnify” not only AppraisalPort but yet all of “its suppliers” as well! .... a promise from us all to defend and hold harmless what can be expected to be an endless list of unidentified “suppliers.” Again, if anyone reading this does not understand what indemnification and hold harmless means then getting a lawyer before you sign contracts, agreements, or any document with such words in them would be my advice. While I wince somewhat less than the prior infamous version, again I see in subsections “ii, iii” that meaning of “the information” while possibly implied is seriously less than defined anywhere that I noted.... Did I miss something?

Section Nine:

Actions by either party are time limited to one year. Look out, you have legal mumbo jumbo here tossing in cause of action with the word “accrued.” I don't know what that means, do you? What I do know is most legal actions regarding real estate appraisals often happen up to two years later, and that most board actions against appraisers can occur as many years later as any board wants. Looks to me like our recourse just got intentionally limited to chop off the time period many of us would need. But again professional legal advice is needed to determine the meaning of those words.

Section Ten:

The “equitable relief” sure sounds one sided to me. I read no mention of relief being “equitable” for the appraiser.

Section Twelve:

You're locked into Mississippi. My opinion? Cheaper for them, expensive for anyone of us not located in that county and state. I have not an inkling what Mississippi laws are like, do you?

CONCLUSIONS AND THOUGHTS ABOUT A SECTION SENTENCE I DID NOT PRIOR DISCUSS:

First, everyone here knows I am NOT an attorney. I am just an appraiser, ok? So these are only my thoughts, not legal advice. However, it would be my opinion everyone needs legal advice and response from their E&O providers. My anticipation is all the E&O providers are going to gurk up on this one also. I doubt E&O will, or would, ever cover an appraiser who indemnifies parties not named on an E&O policy and promises to defend them.

Section One in “Definitions” clears up very early, in the second sentence, that AP is not an agent of any party ordering an appraisal. Nor an agent of any appraiser (User) of the AP services. What alarm bells should this cause all of us to hear ringing the moment we see that? Ok, everyone, get your USPAP hats on and pull them down tight over your heads! ..... Here is my immediate reaction based on my measly USPAP knowledge, and what I have learned about USPAP over the years that I use to guide myself. If a client of my appraisal services wants to use some third party for appraisal ordering and delivery, and it is clearly established that this third party is NOT an agent of my client..............I will NOT just assume my client is authorizing me to ignore my duties of confidentiality to my client, regarding the third party, just because the client attempted to order the assignment through said third party!!!!!!! Even if a client tells me a third party IS an authorized agent of my client, I will not move forward until that client defines for me, in writing, what the extent of authority that third party has as the client's agent. This is far worse. We are agreeing that AP is not even an agent of our client. Yet we are uploading confidential information to AP servers AND information that might possibly be construed to meet Gramm-Leach-Bliley Act status. Remember, all appraisers were defined to essentially be a financial institution under the Gramm-Leach-Bliley Act?

Combine the above with a bunch of undefined use of quite a few undefined “data” types, that can be ported to “affiliated” third parties, and how does all of this keep any appraiser clear of USPAP and Gramm-Leach-Bliley Act violations? Did I miss something? I did not see on my first pass through the agreement any clauses that places AP under onus to protect the appraiser's duty of information confidentiality to the appraiser's client as if it were AP's own duty to that client. I do not read AP indemnifying the appraiser in return should the information be abused by AP or AP affiliated businesses. At the moment, I think I would be required to document that any client attempting to order through AP that the client released me of my duty of confidentiality to that client regarding uploading a report through AP to that client. Also, I would ask that client to indemnify me, and hold me harmless, regarding the Gramm-Leach-Bliley Act regarding any use of information “data," or "the information," by AP or any of AP's affiliates.

An additional concern. The definition of "User Agreement" in the last sentence of Section One appears to me to have everyone agreeing that the user agreement includes copious items that do not appear in this user agreement! Read it. Then carefully watch for a possible shift of any disturbing language to end up "appearing on a screen," later at the AP website, after you have already agreed to what you were not told in this release of the AP user agreement. Do you interprete the meaning of this the same as I do? Maybe my reading is correct, maybe it is not. You decide. Should you and I not be disturbed about what that part said? Again, I recommend actual legal advice as to what that part means.

The above is what I am concerned over about all of this. But I might change my mind as I am not sure what quite a few items in the user agreement mean. Do any of you USPAP scholars and veterans of appraisal CE classes view this differently? I view this as a very, very, serious topic the entire appraisal trade is pretty much ignoring. The trade is not dealing with several of the above matters when the trade uses AMC's, appraisal software company servers, bank owned affiliated divisions that are set up as separate businesses owned by the banks, or places like AP to transmit back appraisal reports to clients. We have duties under USPAP and the Gramm-Leach-Bliley Act, the vast majority of real estate appraisers are ignoring both in these regards. They proceed with absolutely nothing in writing from their clients regarding confidentiality or the Gramm-Leach-Bliley Act to clarify a third party involvement that casts clouds of confusion over the appraiser-client relationship. Can our clients end up with problems because they also fell into the same trap of complacency? I question how many appraisers have understood, or attempted to clarify, who their client is. Too many appraisers seem to not understand that failing to identify their client before taking an assignment, and failing to understand a clients extent of authority granted to some third party, will undoubtly lead to following USPAP violations. Hopefully, the clients themselves will awaken to the dangers of all of this for them also. But we may have to help them see those dangers."

[Dave Ehrnstein]

Excellent! I wish I'd had time to express myself so thoroughly.

Yes, I may qualify as a "USPAP scholar" as you've asked above... I am an AQB Certified USPAP Instructor, so I am at least close. I am also a veteran, with appraisal experience going back into the '70's.

No, I do not view this any differently.

Thank you for spelling out the issues so eloquently.

Dave Ehrnstein
Appraisal Mastery Center

[Workbox]

Dave, they are using you data against you that is your appraisal business priority information. They say you can put any kind of Copyright rights to your work, but they will lift it and add Copyright to it for their company as though it is theirs. But not only that, the E&O's are gearing up to understand these issues that are potential to rear their ugly head for errors.

[Brian Davis]

On Nov. 11th Appraisal Scoopreported that a new AppraisalPort® User Agreement scheduled to become effective December 13, 2008 had been released.  The old and new versions were compared:

According to the Liability Administrator's Appraiser Legal Defense and Insurance Blog:

The only material difference between the two versions is that FNC took the following words out of the last item: “whether any such liability, damages, loss, or claim arises from any act or omission of AppraisalPort (including its sole ordinary or gross negligence) or act or omission of any supplier of data to AppraisalPort (including their sole ordinary or gross negligence).”

While facially appealing, in our view, this deletion does not really change the meaning of the indemnity provision. In other words, if FNC gets sued for any reason based on an appraisal delivered by you through AppraisalPort, FNC could still argue that you are obligated to indemnify FNC for losses or damages that FNC incurs as the result of that lawsuit even if the lawsuit is based on a problem caused by FNC.

This means that, for example, if FNC is sued by a lender for a problem that occurred in your report such as the omission of appraisal data caused by an error inherent in the software, FNC could potentially argue that you must pay FNC’s costs in defending that lawsuit and any damages that FNC may pay to the lender. In this way, the two versions are more or less the same. And again, your insurance cannot cover these additional liabilities that you agree to assume to FNC and its suppliers in the user agreement.
 
Click Here to Read Full Post

Thanks to Al Torres for the tip!

[Thomas C. Linsin]

As indicated yesterday, I had requested that legal counsel get back with me with regard to an outline of the new user agreement in Laymen's terms. The following is the response that I received from FNC with regard to the changes in the new User agreement.

How is this new User Agreement different from the one posted in September?
There are a few changes between the AppraisalPort User Agreement posted in September and this version.
• The most important change is the change to the “hold harmless” language, where the
following language was deleted.
whether any such liability, damages, loss, or claim arises from any act or omission of
AppraisalPort (including its sole negligence) or act or omission of any supplier of data to
AppraisalPort (including their sole negligence).
• We inserted language that allowed us to respond to “inappropriate” use of AppraisalPort and inappropriate language. We also made that change in the AppraisalPort Rules and Regulations.
• We fixed some wording and typographical errors (for example, some of the numbering for the sections).
• We slightly reduced the provisions for damages.
• Finally, the language about “notice” was a little confusing, so we fixed that as well.
Otherwise it is the essentially the same agreement as the September version.
How is this new User Agreement different from the current (2005) version?
Again, there are several changes between the current AppraisalPort User Agreement and this new version (besides the ones noted above)
• We changed “Subscriber” to “User” and made sure that any references to “you” or “your” would mean the same as User.
• Made clear that AppraisalPort and its users will communicate electronically.
• Simplified and clarified the amendment process
• Restored the 2002 option where disputes between AppraisalPort and its users are settled through arbitration not litigation
• Provided more avenues and locations for users to provide notice

Anyone care to decipher this?

[Central Valley CA]

I've talked to my E&O insurance carrier (FREA) and they will not cover indemnification which means you will have to pay for AP's legal fees if they are sued.
In laymen terms, I believe this is what happens:

When they receive your report it gets smashed into little pieces so they can data mine it (and resell your information). When it gets put back together, some pieces may not get put back (gross negligence) Your appraisal may look different than when sent. This gets passed along to the lender. You are hoping that the comment you made about the foundation potentially having serious problems and the value is 'subject to' inspection by a foundation competent contractor is still in the report because if it's not and the lender makes the loan and finds out there were foundation problems and sues you and AP because there was no mention of it in the report....
1. Your E&O will not cover anything.
2. Your legal fees will come out of your pocket.
3. AP's legal fees will come out of your pocket.
4. Damages to you will come out of your pocket.
5. Damages to AP will come out of your pocket.
This is an example of what could happen... from my understanding of several interviews, articles and blogs. There is a good one in the Appraisal Press put out by Alamode (Oct. Nov. 2008 Issue)

So what I can't understand is why any lender would use appraisal port when there is no guarantee on the information and I could only sue a broke appraiser, who more than likely did his/her job correctly.