Real Estate Analysis and Commentary in Hampton Roads

Suing an Appraiser
April 6th, 2011 8:16 AM

Tuesday, December 28, 2010

Are You Thinking About Suing A Real Estate Appraiser?



The bottom line is that suing an appraiser is generally a waste of a borrower's time, emotional energy and money, not to mention that it causes emotional and financial suffering to another person -- the appraiser.  Here are several reasons why suing an appraiser is a bad strategy, based on my experiences and observations as a lawyer who has seen hundreds of these cases: 
  • Most claims by borrowers against appraisers are unsuccessful -- the borrower either recovers nothing against the appraiser or an amount smaller than the cost of the lawsuit.  These days we see more judges and juries finding in favor of appraisers than borrowers.  Whether the borrower feels the appraisal for his or her mortgage lender was too high or too low, judges and juries recognize that the real issue is a declining real estate market and that the damages alleged were not the legal responsibility of the appraiser.
  • 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.  In a few very frivolous cases, the appraiser has won and then sued back for malicious prosecution.
  • Being a party to a lawsuit can negatively affect an individual's ability to obtain a mortgage loan, credit status, and employment in the future.
  • An appraisal is not a guarantee of present value or a prediction of future value. The appraiser's opinion of value is usually defensible as of its effective date.
  • The borrower was almost always not the appraiser's client or an intended user identified in the appraisal report -- in other words, the appraiser was working for the bank, not the borrower.  Borrowers are always free to hire their own appraisers if they are concerned about the value of a property purchase or their loan-to-equity, but 99% of the time, borrowers do not do so.  (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.)
  • 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.

Posted in:General
Posted by Woody Fincham, SRA on April 6th, 2011 8:16 AMPost a Comment

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