By Claudia Gaglione, National Claims Counsel for LIA Administrators & Insurance Services
We have seen several rural appraiser insureds receive discipline from their state licensing boards for their failure to account for the fact that commercial operations were taking place on rural properties they appraised.
In one situation, there was a large sign at the road that read “Fresh Blueberries.” There was also a separate dirt road/driveway leading up to a greenhouse/outbuilding that was located away from the main residence. Adjacent to the greenhouse, there were other signs which appeared to depict other produce items for sale.
The appraiser did not see any business transactions taking place at the time of her inspection. When she asked the property owner if he sold produce at the property, he said that he did not. No mention was made of the potential commercial operation, but the appraiser did include several photos of the “farmstand” in the report.
In another more egregious situation, the appraiser failed to report what appeared to be an auto repair operation in an outbuilding on a rural property. The building was accessed via a separate driveway. It was heated and had air conditioning and a bathroom. It had 3 auto repair lifts and exterior signage that read “Randy’s.” On the day of the appraisal inspection there were numerous automobiles on the premises.
The appraiser did not report a commercial operation because there was no street signage, he did not observe any commercial transactions taking place and the property owner stated that he only did repairs on family autos.
Neither of the above properties were zoned for commercial usage.
Rural properties frequently contain multiple outbuildings and they all should be inspected. The outbuildings might be sheds, barns, greenhouses, guesthouses, etc.
Rural appraisers need to understand that property owners might not want to disclose their commercial operations because they might not be reporting this income. The appraiser has to be mindful of the warning signs and can’t ignore the obvious such as separate driveways, heating and cooling, bathrooms and signage. Sometimes simply taking the property owner’s word for it is not enough.
If a property is being used for commercial purposes, it might violate local zoning ordinances and appraising that property might be in violation of an appraiser’s licensing.