Bad Foundation Claim

[Robert Muir]

Well, I thought that I would make it to my 10th year :lol: without a threat of being sued, but with only a couple of months left before my 10th year, I get a letter from a lawyer about a possible claim against me. :twisted:

The lawyer wrote:
“You prepared a Uniform Residential Appraisal Report on the above-named property. The borrower relied on that report in making their decision to purchase the home and property. They have since learned that the foundation is defective. Your inspection report does not disclose this problem and it is my opinion that you are liable because of your negligence in inspecting the house and/or preparing the appraisal report.”

The letter was about a half page and did not explain what the problem was or what needed to be done for it to be corrected or heaven forbid a cost to cure. Just the basic scare tactics with generalities and no details.

It was a 1996 manufactured home that had a poured concrete foundation. The appraisal was conducted in 2000; now two years later there are foundation problems.

I stated in the addendum that it was recommended that the buyer “Have a qualified home inspector conduct a thorough inspection of the subject property for a better estimate of the condition of the home” I also stated again later in the paragraph that “It is the responsibility of the buyer and his/her agent/home inspector to determine operating/continued life of the items in the subject property.”

The lender had sent me one of those manufactured certificate letters for me to fill out and certify the foundation was designed by an engineer and is for the soil conditions, etc. I refused at the time and wrote a letter back explaining why I could not fill that out. In that letter I stated again: “I recommend that a qualified inspector or engineer inspect the foundation system to determine if it is the correct foundation for this type of home and meets the soil requirements for this area” This was its own paragraph, so it was not buried.

Some of you might remember back in January, I had a subpoena for written records and that I resisted through the legal process and won. I also had a divorce case last year that I had to testify at and basically ate the opposing attorney’s lunch while on the stand. Well can you guess which attorney is now representing the buyer? Some things just grow with age.

I have to until Wednesday to respond or she will advise her client to pursue every remedy available under the law to the fullest extent possible. SO, I will respond to her, but I was wondering if any of you had some comments that would be appropriate to put into a letter as a response to this claim. I have some about how that: I stated in the appraisal process that it was the responsibility of the buyer… and twice recommended that the buyer… I also am going to state that: I cannot be held accountable if the buyer does not read the report or be held liable that if they do read the report and do not follow the recommendations that I made about the home and something arises several years later.

Thank you for your help.
Bob

 

[David S. Roberson]

Bob,

I hate for you to be out any expense for this BS, but I think you need to let an attorney respond. You might inadvertently say something the opposing lawyer could twist around in his favor.

 

[Jo Ann Meyer Stratton]

Was a it a conventional loan or FHA? If FHA, the lender was required to have a licensed engineer inspect the foundation before HUD would insure the loan. If the lender did not have an engineer inspect the foundation, they have a big problem--not you. Yes, contact your attorney before doing anything else.

 

[Farm Gal]

Bob:

I suppose it is too much to hope for that you might have limited the use of your report (in some manner) to the LENDER as the intended user?

I tend to use the scope/purpose of the report to outline who the intended user A(Blah Blah) and what intended use B (mortgage lending decisionmaking) Blah bla bla... and only that entity/use your honor SIR!

Sometimes this works...
Despite the fact that some states do not permit you to prevent the borrower from use of the report when chopped into a fine court line it might cover your tailfeathers....

Otherwise: as indicated above (sigh) have you attorney write the response... short and sweet and go suck eggs.

Regards,
Lee Ann

 

[Nancy in Friday Harbor]

Robert,
If you have E&O insurance, the very first call you should make is to them. They have attornies on staff to handle just this thing.
Explain it just like you did for us.
Good Luck!!

 

[Ross (CO)]

Robert, It sounds like you made sufficient reference(s) in the body of your report to allow the lender and borrower their opportunities to get additional confirmation for the integrity of the foundation. Your E&O representative or local attorney would be your better spokepersons in your behalf, and very likely comments from the Forum up to your reply deadline on Wednesday may offer additional support to you and the wording of your response to the other side. You posting bio says you are in "Utah desert".....not a lot or rain perhaps, and likely much sand. Just what could have failed in such a basement ? To what extent are these "problems" manifested ? Is there a dirt/sand floor beneath ? Is this a setting which has clay material a few feet under the surface ? Is there crawlspace access ? Are ther gutters on house today which may not have been there 2 years ago ? Sounds like they bought a 4-year old property at the time. Some natural settling and simple fine cracks happen to many, many foundations and never lead to massive defects or any sort of problems. Perhaps there is a listing agent who represented the property at that time, and perhaps there is a complimentary buyers' agent who would have helped his or her buyers scrutinize the property before purchase and both sides would have clearly not wanted these parties to sell, or purchase, a home with defects. Each would have represented their respective clients to the max, right ? To think that a buyers' agent would not attempt to observe all the home's primary aspects before suggesting that their clients (the buyers) go through with the purchase...! To think that a list agent would not point out that the home had a defect in the foundation and at least follow it up with..."but it has not caused any concerns or problems for the sellers throughout their 4 years here....! Short of that, sounds very likely that there was no defect with the basement when you were there 2 years ago !

 

[Jeff Horton]

Robert, the best advice (straight from my freind, laywer and state representative) is say nothing to a laywer. They can and will turn your words on you. If you have E&O turn it over to them. Some will disallow a claim if you don't notify them up front of pending litagation. If you dont have a lawyer get one to draft your reply. Be VERY CAREFUL or anything you say or put in writting!!

Personally I feel we are not structural engineers or even remotely qualified to asses foundations. I am a home inspector and I am not qualified for that! So I have my doubts that they have any real claim. Of course the way the law is that doesn't mean it wont cost you a lot of money to defend yourself and prove that point. But foundations inspections are out of our scope of work.

I also read once (maybe on the old board?) where a case was kicked out of court because the client said he relied on an appriasal to make his choice on the purchase of the house. When the buyer was questioned it came out that he not read the the whole report. The judge kicked out the claim beause of that. If he had relied on the report he should have read it all and known exactly what it said. Odds are he never saw the appriasal till closing or latter. How can you rely on something you never saw? Just a thought.

 

[Mountain Man]

Ditto on Nancy & Jeff. Let the E&O attorneys handle this for you, that is why you pay $$$$.$$ for it.

 

[Robert Muir]

Sometimes the answer is right under your nose. Thank all of you who reminded me that I pay for E&O. Let the experts handle it. Isn’t that what we state, get an expert to inspect or approve the item in question. When you have a valuation question, get an expert (appraiser). DUH!!! Thank you again. I have forwarded the whole appraisal and letter of claim to the E&O Company. I think that I was worried about my premiums and if they would raise them or even cancel the policy. Dumb on my part, lets see, raise the premiums a little or pay for a new foundation. Duh again!!! Like I said, this is my first claim against me and I was a little in shock.

Jo Ann, it was a conventional loan. I like the fact that we have to call for an engineer to inspect the foundation for FHA’s. I think it should be done on all manufactured homes.

Lee Ann, I did insert the comment in the first sentence in the text addendum that: “The purpose of the appraisal is to assist the Client, MSC Mortgage, In making a financial decision on the subject property.” I also insert the Multi-purpose Supplemental Addendum, which also has a block (first block at top of page) for the Purpose of the Appraisal, which states: “The purpose of the appraisal is to estimate the market value of the subject property as defined herein. The function of the appraisal is to assist the above-named lender in evaluating the subject property for lending purposes…” Whether this will be of any help remains to be seen. Besides, I’m allergic to eggs.

Ross, As to the Real Estate Agent being held liable, it is in a very small town with only two agents. The selling & listing agent was the same person. The home-owner (buyer), the agent, and the lawyer all live in the same small town, anybody got a guess who does not live in that town. –ME-. I am starting to dislike that town. There have been other appraisal attitude problems there before, but nothing of this magnitude. Usally along the type of: We don’t need no stinkin’ appraiser to tell us what our house is worth, he don’t know nothin’, just trust us hardy pioneer, leave us along, types to tell you what the value is, beside we are never going to sell the home so why bother to determine a selling price. Yes I try to explain the loan & appraisal process to them.

Jeff, it would be nice to determine when the buyer read the report, but I would think that we would have to get the loan officer to testify when they gave the borrower a copy of the appraisal. It seems most LO’s have short enough memories as it is, but to remember back two years ago as to when they gave the borrower a copy is asking quite a bit, but it is still a good idea to pursue. Kinda like our disclaimers, most of the time we don’t need them, but when something like this happens, its good to have them in there.

Thank all who posted, and thank you Wayne for the board. Sometimes I feel like I’m at the bottom of a well out here in nowhere’s ville. It’s nice to know that there are other hard working, sometimes low paid, appraisers out there that have already gone through the same thing or have a different take on it. It makes the learning curve a little shorter and a whole lot easier.

With any luck I will make it to my tenth anniversary date of July 03, without being sued.

Bob

 

[Farm Gal]

Bob:

From prior posts I suspected that you had your tailfeathers under cover... A careful person pretty much takes care of such events in advance (in reasonable states anyway). Some times a judge will rule in your favor sometimes not. Your E&O guys are going to love you 8) though, bet they wish all their clients took the time to insert those phrases!

Glad that our little community has given you the pats on the back and boost you need.

I suspect they were "jus' fishin'" anyway.

Re the eggs: I was recommending that your attorney suggest THEY (the bad guys, scum-sucking low-life wanna be pickpockets with no cause) go suck eggs...

Let us know how this all works out.