Valuations underpin lending, transactions, tax positions and litigation settlements, and a defective one causes losses that are traced back.
Standards. Professional appraisal practice standards govern development and reporting, and departures — an unsupported adjustment, an inappropriate approach, a scope of work inadequate to the assignment — are the usual basis for a claim.
Intended user and intended use. An appraisal identifies who may rely on it and for what. A party outside that identification generally has no claim, which makes the reliance question the first defence.
Negligence versus a difference of opinion. Valuation is a range, and a figure at the edge of a defensible range is not negligent. Claims succeed where the methodology was wrong, the data was ignored, or the assumptions were not disclosed.
Lender claims. Losses attributed to an inflated appraisal require proof that the lender relied on it and that the loss flowed from the overvaluation rather than from a market decline or an underwriting failure.
Damages. The difference between the reported value and the actual value at the date, subject to causation.
Diligence for users. Confirm the intended use and users, the effective date, the extraordinary assumptions and hypothetical conditions, and the scope of work.