Those in real estate have eyes on the trial in New York involving former President Donald Trump where the testimony of an appraiser could be both the key and the highlight of the proceedings pertaining to valuations of commercial real estate.

The Trump organization is accused of misrepresenting an outside appraiser’s opinion, including falsely attaching someone’s name to a valuation he/she did not conduct. Furthermore, it was alleged that the cap rates, comps and ultimate valuations were incorrectly calculated.

Additionally, it is alleged the Trump organization fraudulently misrepresented that a third-party appraiser agreed with the values represented, in a move to convince lenders and auditors that the values represented were legitimate.

“For most appraisers, excepting those whose line of work is litigation support where vigorous examination is expected, their worst professional nightmare is having their work become the subject of a lawsuit or a regulatory investigation,” attorney Craig Capilla, of Franklin, Greenswag, Channon & Capilla, LLC., told Valuation Review. “It can be difficult for an appraiser to remember exactly why he or she arrived at their various conclusions often performed years before any testimony occurs. Even worse, though, is a scenario like the New York proceeding where the appraiser is being asked to testify about conclusions or opinions that he or she has not performed.

“In this instance, the most notable appraiser witness in New York trial was questioned on valuations of various high-dollar New York properties. In that testimony, the appraiser stated that he was unaware he had been cited as providing support for values stated in spreadsheets encapsulating the portfolio of properties,” the attorney added. “The appraiser was adamant that he had not provided those values and that he had no knowledge of his name being cited as providing the information.

“Still, even with those statements, a court is left to determine the credibility of various witnesses and the veracity of evidence introduced in the proceeding. For the appraiser here, he had the unenviable task of ‘proving a negative,’ which is to say, providing credible testimony that he had not performed the appraisals in question. This is no easy task.”

Capilla has talked at length before about how the workfile, properly developed as a contemporaneous record of an assignment and maintained appropriately, provides the best defense for an appraiser when his or her work is under review. Here, he told us, the difficulty grows exponentially because there would be no workfile if the appraiser did not complete the assignment.

But still, a well-developed and robust workflow process can make a significant difference when appraisers are asked to testify.

“Assuming the appraiser regularly produces a properly developed contemporaneous workfile and preserves that workfile in each instance, the appraiser here would be able to show that the lack of any workfile or communications would tend to support his statement that he was not involved in providing any such valuation,” Capilla said. “With the advances in modern technology, it may even be possible to have computers and drives analyzed for any evidence that communications or files were destroyed, and a lack of any such evidence would further support his position.

“Here we are talking about an incident in the extreme where billions of dollars of assets are in dispute and criminal charges are on the line, and in such a case, taking extreme measures to elicit evidence in support may make sense. For the average appraiser engaged in a typical assignment, going to such lengths may not be warranted or even prudent,” Capilla added. “As we all know, not every crime is given an investigation akin to CSI on the television. But the fundamentals of creating and maintaining a good workfile, or adhering to a thorough and detailed procedure, are always a good idea. You never know when you might need all the support you can find, and you cannot go back to build it later.”