In an April 30 decision, 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, 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.
"Finally, adopting Blagg’s contention that an appraiser retained by a lender owes no duty to the buyer/borrower would mean that a prospective homebuyer who seeks to rely on a prepurchase appraisal must contract separately with an appraiser for that purpose.
In the purchase in this case, as is not uncommon, the buyer was obligated to reimburse the cost of the appraisal ordered by the lender. Even if we were to assume such an arrangement were not the general rule, we see no reason to impose on the parties to a transaction the burden of paying twice for the same information simply so that the buyer may join the lender within the scope of the appraiser’s duty of care.
Public policy and common sense compel the conclusion that when a lender to which a prospective homebuyer has applied for a loan contracts for an appraisal of the home, the appraiser the lender hires owes a duty of due care not only to the lender but also to the homebuyer."
The decision was rendered in a Sage v. Blagg Appraisal Company, in which the buyer/borrower sued the appraiser for overvaluing the home because he used the incorrect square footage, among other things. The trial court had dismissed the action concluding, under two prior Court of Appeals decisions, that an appraiser hired by someone other than the buyer/borrower did not owe any duty to the buyer/borrower. In its unanimous decision, the Court of Appeals disagreed and allowed this case to proceed.
The case opens the door for buyers to sue appraisers even when the appraiser was hired by the lender.
Daphne Reaume of Berk & Moskowitz, P.C. argued the appeal for the buyer/borrower. For a PDF of the court’s decision, visit www.berkmoskowitz.com/documents/CV080331.pdf .