What is the statute of limitations for a lawsuit against an appraiser?

Peter Christensen, owner of Christensen Law-Valuation Legal, addressed this topic in a recent article he posted on his business website. This is a common question because many lawsuits against appraisers are filed years after the appraisal, sometimes 10 or more years later, the attorney noted.

“The reason for this is that the plaintiff suing an appraiser may not have known there was a problem with the appraisal at the time it was received or may not have suffered any damages as a result of the alleged error until a loan default or other event has occurred years down the road,” Christensen said. “This plaintiff might be a lender who has foreclosed on a loan or a borrower who believes they paid or borrowed too much based on an allegedly deficient appraisal.

“The applicable statute of limitations for an appraisal-related claim will vary based on the nature of the claim for example, whether it is for negligence, fraud or breach of contract, the state whose law will apply to the claim, and even in a few cases, who is making the claim,” he said. “Based on these factors, the time period might be as short as one year or as long as 10 years.

Then there is something called the discovery rule to consider.

The discovery rule, if followed in a given state, is a rule for determining when the statute of limitations time period begins running.

“In most states, the time period does not simply start running on the date of the appraisal,” Christensen said. “Instead, it generally begins running when the plaintiff has discovered, or should have discovered, the alleged error in an appraisal or suffered damage resulting from the error.

“So, that means the time period may not start running until years after the appraisal; for example, a lender may claim it did not know of the deficiencies in the appraisal until it foreclosed on the property, or a borrower may contend they didn’t know about an appraisal error until another appraiser brought it to their attention,” he added.

Regarding the statutes of repose, Christensen noted that because it often seems unfair for an appraiser to be sued over a very old appraisal, and he has seen appraisers sued over 12-plus year-old appraisals, appraiser organizations have been successful in persuading legislators in some states to enact specific maximum time periods in which lawsuits against appraisers can be filed. These special laws are generally called statutes of repose, which are perhaps best described as statutes of limitation on steroids, he pointed out.

“In contrast to a statute of limitation, a statute of repose generally serves as an absolute time bar to a potential claim, setting a clear deadline,” Christensen said. “Some states that have recently enacted such strict time limitations include Arizona, Louisiana, Minnesota, Mississippi, Oregon, Pennsylvania, Tennessee, Texas, and Wisconsin. In these states, different time limitations may apply to appraisals based on the date of the appraisal, which underscores the importance of obtaining knowledgeable legal advice.”

Christensen stressed appraisers should ask what is the time period in their state, and does their state apply a discovery rule or have a “statute of repose.”

“The most common legal claim against an appraiser is for negligence,” he said.