Court of Appeals Allows Borrower to Sue Appraiser
Under Arizona law, a borrower is now allowed to sue an appraiser hired by the lender. For the first time in a reported decision by any Arizona Court, the Arizona Court of Appeals has recognized that a borrower is likely to rely on an appraisal prepared for the lender, such that the borrower may sue the appraiser for malpractice.
In the case, Sage v. Blagg Appraisal Co., the buyer/borrower discovered that the appraiser had substantially overvalued the property at the time of her purchase as a result of an error in the square footage, among other things. The borrower sued the appraiser. The trial court dismissed the case on the basis that the appraiser was hired by the lender, such that, in the Court’s view, the appraiser had no duty to the borrower. The Arizona Court of Appeals unanimously disagreed.
In its decision issued April 30, 2009, the Court of Appeals held that the appraiser should know that the buyer/borrower in a purchase money loan transaction is entitled to receive a copy of the report and to rely on the report in proceeding with the transaction. Based on that reality and other factors, the Court held, for the first time in a reported decision, that the appraiser did owe a duty to the buyer/borrower. Thus, the Court of Appeals reversed the trial court’s dismissal and allowed the case to proceed. The case was later settled.
The case was handled by the Scottsdale, Arizona law firm of Berk & Moskowitz, P.C. The firm handles all types of real estate appraisal malpractice claims.
