REAL ESTATE LAW UPDATE: July 20, 2015

Appraiser Hired By Lender Owes No Duty to Borrower.

In the case of Willemsen vs. Mitrosilis, 230 Cal App. 4th 622, the Court of Appeal affirmed
the trial court’s decision that the appraiser hired by the lender owed no duty to the borrower. Therefore, the borrower could not sue the appraiser for negligence or negligent misrepresentation.In this case, the borrower was buying raw land in San Bernardino. Although the contract did not have a financing contingency, the borrower was relying upon a loan to close the escrow. The lender hires an appraiser to appraise the value of the land. The appraiser fails to learn that the land sits on an earthquake fault or that the city has plans to condemn a portion of the land. The borrower, after the close of escrow, discovers for the first time that he cannot develop the land as intended based upon these two major issues that were not disclosed in the appraisal. Borrower then files suit against the appraiser alleging negligent misrepresentation among other causes of action because the appraiser failed to address the earthquake fault or the city’s condemnation plans.

The appraiser wins the case on a Summary Judgment alleging, successfully, that he owed
no duty to the borrower. Therefore, it was not appropriate for the borrower to rely upon the
appraisal. The contract was between the lender and the appraiser and the lender was the specific intended user of the appraisal to determine if they wanted to make the loan. The borrower was only an incidental beneficiary. Because the borrower was not the intended user of the appraisal the borrower could not rely upon the appraisal.

Comment: The borrower was the one who should look himself in the mirror to decide who screwed up. He was the one who failed to discover the earthquake fault and the condemnation issues. Seems like it was a $1.6 million dollar error in judgment or incompetence.

Scott Souders is a real estate attorney who has practiced real estate law in excess of 39 years in Southern California.

Disclaimer: The Real Estate Law Update cites cases or statutes which are summarized and
should not be relied upon without fully reading the cases or statute in the advance sheets and shepardizing the same and consulting with your own attorney.

J. SCOTT SOUDERS, P.C.
ATTORNEY AT LAW
13 CORPORATE PLAZA DR., SUITE 200
NEWPORT BEACH, CA 92660
(949) 718-3574
(949) 718-3582 FACSIMILE
scottsouders @ sbcglobal.net