Appraisal Malpractice – Who Can Sue and What Other Limits Apply

Authored by Jennifer Cranston
Published by AZRE

Appraisal Malpractice – Who Can Sue and What Other Limits Apply

Last year, the Arizona Court of Appeals issued a decision that some believe will open the floodgates of malpractice claims against real estate appraisers. While the court's opinion cleared the way for some new plaintiffs, there are still substantial barriers to successfully holding appraisers liable for negligently prepared mortgage appraisals.


In 2004, Ms. Sage executed a contract to purchase a home for $605,200. The purchase was contingent on the home appraising for at least the sale price. The defendant appraisal company, hired by Sage's lender, appraised the property at $620,000 based on 2,440 livable square feet. After the sale, Sage learned that the actual square footage was 1,871. She filed suit against the appraisal company alleging the appraiser should have valued the home at $350,000, in which case she would have cancelled the sale. The trial court ruled that Sage could not maintain her lawsuit because the appraiser did not owe her a "duty" - which is the legal term for an obligation to act or refrain from acting in a particular manner. The Court of Appeals reversed.


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