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A buyer and seller agree to a transaction subject to high ratio

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A buyer and seller agree to a transaction subject to high ratio mortgage financing. Lender commissioned an R.E. appraisal which confirmed value agreed to in the accepted offer to purchase. The appraisal erred on the zoning regulations and overstated the true value by $100,000. the purchaser is out of pocket this amount. Who is liable to the purchaser?

It is possible that no one is liable to the purchaser.

It is not the vendor, as there is no obligation on the vendor to advise the purchaser of zoning regulations that apply to the property. If the vendor misrepresented this specifically to the purchaser, that could create liability, but unless there was a specific representation or warranty in this regard, the principle of buyer beware would apply and the risk passes to the buyer upon sale.

The lender has no liability to the purchaser. They did not make any representations to the buyer on the state of the property.

The appraiser that misstated the issue of the zoning problem is the real source of the problem. But unless this appraiser was hired by the purchaser, he would likely owe no duty towards the purchaser. Usually an appraisal obtained by a lender for purpose of approving financing is made specifically for the bank 's purposes, and usually the purchaser will not even be given a copy of such a document. If a copy was turned over to the buyer by the bank, that would not create any legal duty between the appraiser and the buyer. It is the bank that hired then appraiser and they are the ones entitled to the report. The bank could potentially sue in that case, if they suffer a loss.

But the purchaser could only successfully sue the appraiser if the appraiser was retained by the purchaser, or the appraiser was aware that the purchaser was going to receive and be relying on the report.

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