Real Estate Appraisers Claims Examples

Real estate appraiser claims are unexpected and can happen to most any organization. Most real estate appraisers’ professional liability claims are triggered by a transaction that results in a valuation that is less than the appraised value. The following example is representative of a typical appraiser’s claim:

An insured real estate appraiser appraised a property for a lender, and the lender provided a mortgage to the buyer. Subsequently, the buyer defaulted on the mortgage and the lender foreclosed. The lender recovered less than the original loan amount, which was also significantly less than the appraised value. The lender brought a claim against the appraiser claiming the appraisal was negligently completed.

A number of other claim examples are noted below, but are in no way all encompassing:

Example 1: The insured real estate appraiser was asked to do limited review of an appraisal previously submitted for a loan application. The insured appraiser was unable to view the condo property because it was located in a gated community. The appraiser noted this on his report. The lender sold the property at foreclosure for a loss, and claimed a scheme by the appraiser to inflate the property value.

Example 2: The insured real estate appraiser appraised a home for a lender. The lender then sold the loan to another investor (the plaintiff). The property owner defaulted on the loan and the plaintiff foreclosed. The value of property was not sufficient to cover the amount of the loan. A suit was filed against the property owner, who in turn filed a cross complaint against the insured real estate appraiser alleging the $680,000 appraisal was inaccurate and negligently performed.

Example 3: In order to close a new purchase, the insured real estate appraiser performed an appraisal for a lender. The owner defaulted, the lender foreclosed and the property value turned out to be significantly less than the loan amount and the appraised value. Upon reviewing the appraisal, the lender determined that the appraiser had appraised the wrong property, and brought a claim for negligence against the appraiser.

Example 4: This case is longer and more complex. Click here for a summary of a court decision involving a real estate appraiser claim.