Recent Cases Affecting Licensed Appraisers and Lessons Learned Therefrom — Michelle Itkowitz Seminar for Columbia Society Real Estate Appraisers
March 6, 2015
On February 23, 2015 Michelle Maratto Itkowitz and Jay B. Itkowitz presented a professional-credit seminar to the Columbia Society of Real Estate Appraisers entitled, Recent Cases Affecting Licensed Appraisers and Lessons Learned Therefrom.
Here is a full copy of the materials!
And here is a brief sample from the materials:
Kosterich v. Ciotta, 63298/2012, NYLJ 1202675952250 at 1 (Supreme Court, Westchester County, August 8, 2014) (13 Minutes)
Facts:
Appraisal performed by homeowners who were trying to refinance their home. Before the bank would make the loan, the bank required the homeowner to get an appraisal from Defendant-Appraisers.
In determining the value of the property, Appraisers used three sales of comparable properties which took place within the last six months to a year that were located within a half mile of the premises.
Homeowner alleged Defendant-Appraisers were negligent in their appraisal of the premises and committed professional malpractice. Homeowner alleged:
• That Appraisers breached duty to Homeowner by failing to exercise reasonable care, skill, and diligence in performing their appraisal report as an ordinarily prudent appraiser and appraisal company would use under similar circumstances.
• That Appraisers did not use appropriate or accurate comparables in valuing the premises and failed to provide support for their final valuation of the premises.
• That the appraisal didn’t comply with Uniform Standards of Professional Appraisal Practice.
• That due to negligent preparation, the premises was valued 200k lower than actual value.
Legal Arguments:
Appraiser argued that there was no privity with Homeowner and thus Appraisers owed no duty.
Outcome and Court’s Reasoning:
Court finds there is no privity and that the intended user of the appraisal was the Lender and not plaintiff.
Extra Info:
Let us explain the concept of “privity of contract”. Black’s Law Dictionary defined “Privity of Contract” as:
The relationship between the parties to a contract, allowing them to sue each other but preventing a third party from doing so.
The underlying concept is that a person cannot be made the debtor of another against his will. Contractual rights and duties only affect the parties to a contract. This principle is the distinguishing feature between the law of contract and the law of property. True property rights are ‘binding on the world’ in the lawyer’s traditional phrase. Contractual rights, on the other hand, are only binding on, and enforceable by, the immediate parties to the contract.
What this Means for Appraisers:
Homeowners trying to refinance that do not like your appraisal cannot sue you.
