Suing the Appraiser for the Shortfall in Valuation
We are still looking at the situation where Bill submitted an unconditional Offer in a bidding war, defaulted on the transaction and now has $170,000 in losses.
Where can he go to seek some reimbursement?
There are effectively two possibilities with the Appraiser:
1) His own Appraiser who undertook the appraisal before the Offer,
2) The Bank’s Appraiser who did the appraisal afterwards.
These possibilities are however rather unlikely. First, it is not commonplace, in fact, it would be extremely rare to have your own appraiser complete a valuation of the property before your Offer was accepted. This is just not going to happen. If it did, and if the valuation were negligently completed, then there is the opportunity to sue.
The second circumstance is the Bank’s Appraiser. The important issue here is that the appraiser was retained by the Bank, not Bill. There is no privity of contract. Essentially, that means no lawsuit.
Next, there would be no damages even in the case of a negligent appraisal by the Bank’s own appraiser. Just get somebody else and see if the second opinion is the same. If you can't find anybody, then, that means no negligence!
In addition, there is the earlier issue of the unconditional Offer. It could have been made conditional upon:
2) Appraisal, or
3) A Seller Take back mortgage for the deficiency in the valuation.
In this case, no conditions, would also suggest no lawsuit. The Buyer elected to assume the attendant risks associated with this course of action.
A full statement of the facts are set out in:
Brian Madigan LL.B., Broker