Tuesday, December 28, 2010

Are You Thinking About Suing A Real Estate Appraiser?

"Can I sue an appraiser?" "Should I sue the appraiser?"  As a lawyer working exclusively in the field of valuation liability and regulation, I've seen hundreds of cases filed against real estate appraisers by borrowers and property owners, variously claiming that an appraisal for a loan was either too high or too low or made some other kind of error.  Borrowers and other parties thinking about suing an appraiser should know the following:

  • Most claims by borrowers and property owners against appraisers are unsuccessful and result in no monetary recovery for the borrower.  In other words, the borrower loses.  Part of the reason for this is that the borrower is not the appraiser's client in appraisals for mortgage lenders and the stated purpose or "intended use" of the appraisal is for the lender's evaluation of a mortgage transaction. 
  • If the borrower's claim is that an appraisal was "too high" in 2003-2008, judges and juries usually recognize that real estate losses are more likely the result of the declining real estate market and not legally caused by the appraisal. 
  • If the borrower's claim is that a current appraisal is "too low," judges and juries usually realize that appraisals in the current real estate market are often lower than what a borrower or property owner may desire and that the appraiser was performing his or her job of providing an unbiased opinion of value.
  • The appraiser's opinion of value is usually defensible as of its effective date.  An appraisal is not a guarantee of present value or a prediction of future value.
  • 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.