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Appraiser has no duty of care to real estate seller

May 16, 2016

The Indiana Court of Appeals ruled an appraiser has no duty of care to a seller after he appraised a house for much less than the proposed purchase price. The COA upheld summary judgment for the appraiser in a case where the seller alleged negligence, fraud and slander of title.

BSA Construction LLC entered into an agreement to sell residential real estate to Lilia Lopez. Lopez received financing from Bank of America pending a final appraisal, which was done by Jimmie Johnson of LandSafe. The purchase price was agreed at $60,000 but Johnson only appraised the property for $50,000, and thus Bank of America denied financing. BSA appealed the bank’s decision but the bank upheld it.

BSA then filed suit against Johnson in Hendricks County, and the case was transferred to Marion County. Johnson filed for summary judgment and moved to strike numerous evidentiary items BSA had designated. The court granted the motion to strike and summary judgment, and BSA appealed.

BSA claimed Johnson owed them a duty of care on negligence principles, but the COA disagreed, saying Johnson’s duty of care was to the bank that hired him, not BSA. “In an arms-length transaction like the one here, we cannot conclude that Johnson had any duty to serve two masters with conflicting interests. Whether Johnson was bound by or aware of the code of ethics of a professional association, or knew that a poor appraisal might be associated with the real estate for some period of time, does not change the fundamental arrangement of the duties at issue here,” Judge L. Mark Bailey wrote for the panel. “Johnson’s duty was to the bank and as a matter of law cannot — because of the contradictory interests at issue — have extended to BSA.”

BSA also claimed Johnson’s appraisal amounted to fraud, but Bailey wrote that BSA never took any action after the appraisal after Johnson was appointed and the risk of an unfavorable appraisal was already known to BSA.

Finally, BSA claimed slander of title, but Johnson did not affect BSA’s ownership of the property, just the monetary value.

The case is BSA Construction LLC v. Jimmie E. Johnson, 49A02-1506-CT-749.

 

 

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