Judge Rules Appraiser/Lender Owe no duty of care

[Terrel L. Shields]

The borrower isn't a user of the appraisal.

Exactly. It's called Privity and recognized in many states. Appraiser's sole responsibility is to their client - not a third party and a borrower is a third party.

 

[John Hassler]

Be careful what you wish for. If the borrower is subsequently owed a duty of care such that the appraiser is liable for property defects then expect the appraisal engagement letter to include the actual cost, plus a management fee, for the hiring of specialized professionals.

Thirty years ago or so FHA work paid an extra $25 per assignment, which didn’t make economic sense so I turned down all FHA work.

In truth, all FHA loans should require an inspection by an FHA-qualified inspector, not an appraiser, who then provides their findings and recommendations to the appraiser/lender/buyer.

 

[alebrewer]

In truth, all FHA loans should require an inspection by an FHA-qualified inspector, not an appraiser, who then provides their findings and recommendations to the appraiser/lender/buyer.

And if you're doing new construction FHA, make sure the client provides you a copy of the 92541 prior to inspecting the property.

 

[Carnivore]

WOW! How did this rise from the grave: I thought this was settled and buried.

 

[alebrewer]

OP just feels the need to keep coming back for more...

 

[Huds_Harm]

Exactly. It's called Privity and recognized in many states. Appraiser's sole responsibility is to their client - not a third party and a borrower is a third party.

Thread 'Appraiser hired by lender owes a duty to buyer/borrower.'

May 1, 2009

AZ COURT OPINION:Appraiser hired by lender owes a duty to buyer/borrower.

This should open up a ton of litigation. What does everyone think??

The Arizona Court of Appeals has ruled, for the first time in an Arizona published opinion, that an appraiser hired by a lender owes a duty to the buyer/borrower in that transaction. In its decision issued April 30, 2009, the Court focused on the reality that the buyer would likely never hire a separate appraiser. For that and several other reasons, the appraiser owes a legal duty of care to the buyer/borrower.

In this case, the...

• Ryan Bailey
• Replies: 133
• Forum: General Appraisal Discussion

Reading just the first two pages of this case, I believe the lender owed the borrower a "standard of care" regarding the clause in the sale agreement "contingent upon an appraisal of the Premises by an appraiser acceptable to the lender for at least the sale price." (Did not the court find as much?)

Tell me Tim, what is such a standard of care called? When one party owes the other party a "standard of care" and the party owing that standard has all the power and knowledge to effect the outcome of how the standard is applied in equity, what is such a relationship called?

 

[George Hatch]

The court has spoken in this case. As per applicable law and previously established legal precedence.

 

[Terrel L. Shields]

"contingent upon an appraisal of the Premises by an appraiser acceptable to the lender for at least the sale price."

The beef is with the lender, not the appraiser. It does not mean the lender cannot dismiss the appraisal but if they choose to do so, it only reflects their assessment of the appraisal via either an administrative review or a technical review. Arizona rules this way but that is only one state. In AZ it might be law, but not so much in other states. AZ's ruling is an aberration to the many cases where the ruling is the opposite. Texas maybe not so much. OTOH, privity itself is slowly being chipped away in many jurisdictions. Another reason appraisers are badly underpaid. If we have some special duty to the borrower, perhaps in the future the appraiser will just have to co-sign the notes along with the borrower. I wouldn't be surprised.

https://www.txcourts.gov/media/1458542/220166.pdf

TX: More Erosion of the Privity Doctrine - Legal Malpractice Legal Malpractice & Expert Witness Services

O’Donnell v. Smith, 52 Tex. Sup. Ct. J. 52 (Tex. 2009). TX: Underlying decedent’s estate claims Student Contributor: Aaron Moncibiaz* FACTS: Executor Thomas O’Donnell sued Decedent’s former attorneys, Cox & ...

legalmalpractice.com

Court Held That The Estate Planning Privity Rule Barred Granddaughter’s Claim For Malpractice Against Her Grandmother’s Attorneys Regarding The Failure To Execute A New Will

In Flores v. Branscomb PC, before her death, the decedent hired counsel to prepare a new will. No. 13-18-00411-CV, 2021 Tex. App. LEXIS 4612 (Tex.

www.fiduciarylitigator.com

In Flores v. Branscomb PC, before her death, the decedent hired counsel to prepare a new will. No. 13-18-00411-CV, 2021 Tex. App. LEXIS 4612 (Tex. App.—Corpus Christi June 10, 2021, no pet. history). The new will would have named the decedent’s granddaughter as her executor and as a beneficiary. The decedent died before signing the new will, and the granddaughter sued the decedent’s attorneys for malpractice. The attorneys filed a motion for summary judgment, arguing that they owed no duty to the granddaughter. The trial court granted the summary judgment, and the granddaughter appealed.

Nobility Homes of Texas, Inc. v. Shivers

Nobility Homes of Texas, Inc. v. Shivers - 557 S.W.2d 77

law.justia.com

 

[Tiffany Gibbons]

The borrower isn't a user of the appraisal. They are a customer of the lender and are *applying* to borrow money that doesn't belong to them. Maybe they qualify for the loan and maybe they don't. Maybe the property and its value fits the lender's criteria and maybe it doesn't.

The only relationship an appraiser has with a borrower is when the borrower or their broker opens the door and provides access. It's the same relationship an appraiser has with a lockbox on a vacant home and nobody is showing up to show the property.

Great Analogy! Exactly.

 

[shrubberyvaluation]

A feel good thread about a judge doing the right thing.