Wednesday, April 28, 2010

Information for Borrowers Thinking About Suing an Appraiser

Here are the main reasons why suing an appraiser is a bad strategy for borrowers, based on my experiences as a lawyer:
  • Most claims by borrowers against appraisers are unsuccessful.

  • The appraiser's opinion of value is usually defensible as of its effective date and an appraisal is not a guarantee of present value or a prediction of future value. 
  • The borrower was almost always not the appraiser's client or an intended user identified in the appraisal report. (Residential borrowers can determine who the appraiser's client was by looking at the data box entitled "Lender/Client" near the top of the first page of standard appraisal forms.)
  • Judges and juries recognize that real estate losses are more likely the result of the declining real estate market and not legally caused by the appraisal. 
  • A borrower who loses a lawsuit against an appraiser can be held financially liable for the court costs incurred by the appraiser.  These costs can be several thousand dollars and, in some cases, much more.
  • Filing a lawsuit can negatively affect an individual's ability to obtain a mortgage loan or employment in the future.
  • If a borrower provided false information when applying for the loan (such as about income or occupancy), the borrower's fraud will likely be exposed during the lawsuit.  Mortgage fraud is a felony for which many borrowers have been prosecuted.  See www.mortgagefraudblog.com