Bad appraisal for VA loan - complaint filed/restitution

So I just did a basic google search for the question "Who does a real estate appraiser work for?" and got this:

"The mortgage lender or financing organization typically hires the appraiser. "

Assuming that's true in all cases (obviously a Google search is not real "legal research"), although it's clear that YOU suffered a compensable injury by overpaying for the house, the question would be whether you have to file a claim against the lender or against the appraiser.

If you didn't hire the appraiser (either directly or through a POA arrangement) then the appraiser may have owed no legal duty to you, the buyer. His duty was to the lender.

Certainly the lender is going to be pissed that they loaned money on a house for more than the house was worth, but the question is going to be this: If you relied detrimentally on the appraisal done by an agent of your lender and paid too much, do you have recourse against the lender for the negligent act of their agent, the appraiser? Or does the law presume you to be sophisticated enough to be responsible for negotiating a price that is agreeable to you and to look out for your own interests?

From a legal standpoint the question would be whether you, the buyer, are entitled to rely on the representation of the appraiser. That may be controlled by contract (your contract with the lender), or by statute, or by case law in that state.

The lender may order the appraisal but the buyer almost always pays for it, either directly or at closing.

I went thru an appraisal nightmare when the ex re-fi'd the house into her name. The appraisal was important because it would determine my share of the equity.

We paid $330k for the house then added a $30k garage/shop. We did some other improvements as well. According to real estate records for the area homes increased in value, on average, 5% to 12% per year from 2015 thru 2019. This knucklehead came out, did the appraisal with comps, etc and submitted his report. According to him the appraised value was $388k. Both the ex and I figured the appraisal should've been in the $425k ballpark. I had another appraiser review the report and he agreed it seemed low. But, short of some sort of egregious error, like what happened to the OP, there was nothing I could do unless I wanted to take it to court...and there wasn't. I wasn't in a position to do that or I would've. It also wasn't my re-fi so I couldn't just hire another, competent, appraiser.

She's going to be selling the place in the near future and I'm gonna be pissed when that place sells for $425k. His shitty appraisal probably cost me $15k to $20k. And there are some weird rules about appraisals. That house is 3200 sq ft. But because half of it is below grade, only the portion above grade counts as livable area, regardless of how well the below grade area is finished off. I learned a lot about appraisers. I view them about the same as "journalists" in terms of their integrity.

I hope this works out for you, CS. It's kind of a helpless feeling.

Appraising is one of those things where it's easy to get a job doing it, but it's very difficult to actually be great at it.

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Originally Posted by Bailey Guns

The lender may order the appraisal but the buyer almost always pays for it, either directly or at closing.

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Yes, I paid the appraiser.

He does haves E&O.

Still haven?t heard from the VA on if I may deal with him directly or not. If I don?t hear anything by tomorrow by lunch, I?ll call the appraiser directly and try to clarify on what he thinks right looks like, if he plans to go through his insurance company, etc. so I can at least gauge him.

And let me be clear, I don?t want to destroy the dude or have his life ruined, but he messed up, knows and admits it, and seems to want to make it right.

The impact to the lender is past tense and immaterial at this point. That loan is paid off. But I still lost a lot of potential money due to the improvements we made and the market value at the time we sold the house. And since we sold it for more than we paid, we are subject not only to the loss of the increased value vs what the gain should have been, but also to capital gains taxes which, in conjunction with the cost of the improvements we made, results in a true loss regardless of having ?made? money from the greedy gubment?s perspective.

As long as attorneys aren't involved, there should be no issues taking to him. If either of you aren't acting adults, then letting a third party handle the situation is ideal.

I’m far enough removed from the situation that I’m confident I’m not gonna be dumb from emotion. But, as weird as this sounds, I don’t want him to screw himself by being in a panic. I simply don’t know what right is, so even though I want this made right, I don’t want him to be stupid either. He made a mistake. He needs to rectify it. But that doesn’t mean he needs to go in full bore without someone advising him. I just want it made right. I don’t want to destroy the dude.

I didn't think you were behaving badly. I'd often tell people not to talk to each other when I was the claim rep for auto accidents. No legal reasons, but those conversations tended to get out of hand more quickly than when they would talk to me as the intermediary. Thought it was worth a mention for those following along, more than for you. Good luck.

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Originally Posted by CS1983

Yes, I paid the appraiser.

He does haves E&O.

Still haven?t heard from the VA on if I may deal with him directly or not. If I don?t hear anything by tomorrow by lunch, I?ll call the appraiser directly and try to clarify on what he thinks right looks like, if he plans to go through his insurance company, etc. so I can at least gauge him.

And let me be clear, I don?t want to destroy the dude or have his life ruined, but he messed up, knows and admits it, and seems to want to make it right.

The impact to the lender is past tense and immaterial at this point. That loan is paid off. But I still lost a lot of potential money due to the improvements we made and the market value at the time we sold the house. And since we sold it for more than we paid, we are subject not only to the loss of the increased value vs what the gain should have been, but also to capital gains taxes which, in conjunction with the cost of the improvements we made, results in a true loss regardless of having ?made? money from the greedy gubment?s perspective.

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Pardon my ignorance, but how would you have lost money paying less tax on capital gains you didn't' receive?

Knowing a little about your history, I assume you didn't meet the criteria of living in the residence for two of the last five years.

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Originally Posted by Bailey Guns

The lender may order the appraisal but the buyer almost always pays for it, either directly or at closing.

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Right, but just because the buyer pays the appraiser, that doesn't mean the appraisal is for the benefit of the buyer.

The purpose of the appraisal is to protect the LENDER, not the buyer.

Think about it: If you are buying with cash, do you even NEED an appraisal? Why would you?

The appraisal is paid for by the buyer because getting an appraisal is one of the conditions for the lender loaning the money to the buyer.

Lender says "you want to borrow my money to buy a house? Then YOU pay for an appraisal to make sure I don't end up with a $100,000 house as collateral on a $200,000 loan."

Based on that, I'm not sure the buyer of the house has recourse against the appraiser. Certainly the lender might have had recourse, for example, the buyer defaulted and the lender foreclosed and only afterward found out that the house is worth a lot less than they thought it was.

But if the house has been sold and the lender has been paid back, then from the lender's viewpoint, it's no harm, no foul.

So once again, it goes back to this: Does the appraiser owe a legally enforceable duty to the buyer? And is the buyer entitled to rely on the representations of the appraiser who is there to protect, not the buyer's interest, but the lender'?

As I said above, that may be determined by what is stated in the contract, or by statute or by case law in that state.