Buyers Should Not Rely On The Bank’s Appraisal

20 May, 2019
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It is not unusual for a buyer to be confused about the role of an appraiser and to think that, in some sense at least, the appraiser is working for him. After all, in most cases the buyer pays for the appraisal. Moreover, even if the appraisal report is delivered to the lender, a copy (in California, at least) is also given to the buyer. Further, most of the time — not always, though — the bank’s interests and the buyer’s are closely aligned. That is, they both want to know what value an independent expert assigns to the property.


But buyers ought not to assume that an appraiser’s report is intended for the buyer’s reliance. A recently-decided case from California’s Fourth Appellate District is instructive in this regard. (Willemsen v. Mitrosilis, Fourth Appellate District, Sept. 24, 2014)

In February of 2007, Willemsen entered into a contract to purchase 4.83 acres of vacant land in San Bernardino County from Avista Development, LLC. Subsequently, Willemsen sued both his broker, who was a dual agent in the transaction, and also the bank’s appraiser, AppraisalPacific. Willemsen alleged that AppraisalPacific had overstated the value of the property, and that it had “failed to account for either an earthquake fault line running across the property or the loss of land that would be suffered when a local government entity ran a planned road over the property…” He argued that “his reliance on the appraisal was a substantial factor in causing him monetary harm.”

Defendants Andrew Mitrosilis and Kraig Takacs (the AppraisalPacific defendants) entered a motion for summary judgment — essentially a dismissal — on the grounds that (1) Willemsen was not the intended beneficiary of their appraisal; (2) he could not establish that he justifiably relied on the appraisal; and (3) neither they nor the lender intended the appraisal to influence Willemsen’s decision to buy the property.

The trial court granted the motion. The Fourth District Court of Appeal upheld the trial court’s decision.

The Appellate Court noted that the appraisal itself stated: “The function of this appraisal report is to provide Farmers and Merchants Bank with a Summary Appraisal Report.” It further stated, “The intended use of this appraisal is to assist Farmers and Merchants Bank in analyzing a new loan for the subject property.” It went on to say “This report may not be used for any purpose by any person other [than] the party to whom it is addressed without the written consent of the appraiser.”

The appraisal report opined that the purchase price of $1.6 million was under market and that the property value was $1.78 million. Thus, it provided the bank with reason to believe that the property was sufficient collateral. The report did not, however, address the issue of whether the property was appropriate for the use that Willemsen had intended.

In analyzing relevant cases, the Appellate Court quoted from Bily v. Arthur Young & Co. (a case regarding an auditor’s liability) that the “risk of liability to which the supplier [of information] subjects himself … is vitally affected by the number and character of the persons, and particularly the nature and extent of the proposed transaction.”

In the case at hand, the appraisal company took on a risk of liability with respect to giving the bank information as to the value of the property as collateral. The appraisal had nothing to do with whether or not it was suitable for the buyer’s intended use of the property.

If a buyer wants an opinion as to the value of a property and/or of its suitability for one purpose or another, he should hire his own appraiser or other expert; and he should not rely on the appraisal supplied to the bank. That appraisal is not intended for him and he has no cause of action should it turn out to be off base.

Why Use AMPI?

AMPI is the national association of real estate professionals that have, since 1956, gathered under laws and codes of ethics and conduct to create a reliable, trustworthy an efficient real estate environment in Mexico.

AMPI consists of separate autonomous sections all throughout the nation, as well as more than 4,000 associates and affiliates.

Each section is independent and has its own board of directors, only surpassed by a national board of directors comprised of twenty associates from all over the republic.

Developed over the years with the input and knowledge of its members, AMPI is much more than just a collection of offices.

AMPI has been a solid and recognized institution in Mexico for the past 27 years. It was originally established in 1956 and was consolidated in 1980.

AMPI is currently represented in all the principle cities and regions of Mexico stretching from Tijuana to Cancun.

The Riviera Nayarita, Vallarta and Compostela chapters of AMPI are dedicated to promote the best practices in real estate by providing its members with education to reinforce the standards of ethics that give our industry the credibility which our clients deserve.

AMPI is committed to giving our membership access to a multiple listing service that forms the platform from which our industry can expand locally and into other markets while giving our members precise and up to date information that is vital to continuous improvement and growth.


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