Legal Question in Real Estate Law in Michigan
Inflated Real Estate Appraisal
We have a purchase agreement on a home in NC and have been approved for the mortgage. The previous owners have only lived in the house for 5 months and it appraised for $173,000 then which is our purchase price. Now, our lender's appraiser valued the property at just $163,000 - a $10,000 drop in 5 months - very odd! I called both appraisers and in so many words our lender's appraiser said that the first appraiser inflated the value for his client. When I spoke to the first appraiser about the disparity, he began stuttering and sounded nervous and would not disclose any info to me about the appraisal based on the privacy of his client (sounded fishy). Do we have the right to cancel our agreement based on this new information and how can we determine if the first appraiser has inflated the value? This info has created serious problems for both ourselves and the sellers as they are already moving out and have made other commitments as have we. Thank you!
2 Answers from Attorneys
Re: Inflated Real Estate Appraisal
Inflated appraisals are a common law fraud; but might also violate the Truth in Lending Act. The only way "to prove it" is to file a lawsuit. You may not want to cancel the transaction depending on your remedies available under the TILA.
Yours truly,
Francois M. Nabwangu, Esq.,
http://fnabwangu.googlepages.com
Re: Inflated Real Estate Appraisal
$10,000 is not a tremendous disparity. Real estate appraisals have some subjective factors. However, your purchase agreement should have covered this possibility. I think the sellers should adjust their price downwards or you should be able to get out of the contract. The language of the contract you signed should guide your actions.
Good luck.
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