Need information about fraud.

[zell545]

What is the name of your state? NY

Hi. My friend is in a dilemma. He owns an appraisal office which determines if the buyer is suitable for a loan or not from the bank. Anyways, a woman claims that my friend's company measured her home incorrectly. She is suing for fraud. She recently had a different appraiser who measured her gross living area to be 1,200 sq ft. My friend's company measured it to be 1,500. She is suing for fraud because she thought the house was big but its not. My friend did not intentionally measure it to be 1,500 rather it was a mistake. Plus it was his workers who measured it. Now my question is in this situation, what is the outcome if she files a lawsuit? Will the consequences be great?
Thank you

[Bigfoot]

An appraisal company determines the value of the property, not the Buyer. The lender determines the qualifications of a Buyer to purchase.

300 sq. feet is a big difference, but only matters when it comes to value of the house in determining taxes and other fees.

Owner should carry errors and omissions insurance. And, yes, the owner is responsible for errors by his/her employees.

But who says the second appraiser is correct? Maybe the first one incorrectly included some unheated space which should be spelled out separately.

What exactly would the lady be suing for? The question is if her purchase price is based on 1500 or 1200 as advertised by the Seller.

[zell545]

The woman purchased the house for $575,000 in 2004. Now the house is valued to be $700,000.

[zell545]

I believe she is suing for fraud.

[danno6925]

She is suing for fraud because she thought the house was big but its not.

I agree with BF - 300 sq ft is a fairly large difference. If your friend can illustrate where the additional square footage "went" it might not be a long trial.

The woman purchased the house for $575,000 in 2004. Now the house is valued to be $700,000.

Based on who's appraisal - the 1200 or the 1500 sq ft?

I believe she is suing for fraud.

Your friend was the expert in this case, and should have either hired someone competant to complete the work, or done it him/herself. This is all too common these days in real estate. Since the bubble first started to inflate, people of lower and lower quality are getting hired to compensate for the increased volume, and the quality of service invariably suffers as a result. I hope your friend only made an honest mistake here. Otherwise, he'll be looking for a new line of work along with his staff. Real estate fraud goes over like a fart in church with judges.

[HUD-1]

Unless there is more to the story I don't think it is fraud, just incompetence. The appraiser that signed the appraisal is the one on the hook for the info. USPAP requires the appraiser to visit and inspect the subject property. Hiring workers to take measurements, does not releive the appraiser of their responsibility. Also, did the appraiser rely on info at City/Town/County Hall to determine the square footage? Was the City Hall info correct? Is there below grade space or space with low ceilings that was not considered GLA by the second appraiser?

The point about error and omissions insurance is right on the mark. The points about finding the source of the discrepancy are key too.

[LindaP777]

Fraud - intentional deception resulting in injury to another person;
something intended to deceive; deliberate trickery intended to gain an advantage

No, I certainly don't see this as fraud either. Perhaps incompetence, perhaps differing opinions. It wasn't intentional (assuming he was wrong), he didn't gain by it.
Most homeowners do not buy their house based solely on the square footage, but rather the style of the house and whether or not it would be suitable and large enough (based on eyeballing it) for their needs. The appraiser wouldn't have even been hired until after the sales contract was signed. More than likely, the appraisal would have been a requirement of the bank - I doubt your friend required it. Did you buyer have a clause in the sales contract that gave her an "out" if the house was not 1500 sq ft? I doubt it. Are you saying your friend would not have bought this house had she know it was 1200 sq ft, instead of 1500 sq ft? Was the house advertised as 1500 sq ft?
I think your friend is being unreasonable.

[zell545]

Here's the story. My friend's worker appraised the gross living area of the house for 1500 sq ft in 2005. The person who bought the home in 2005 said she purchased it based on the gross living area. Now the woman wants to refinance her home. When refinancing, the bank requires an appraiser to inspect her home. This new appraiser inspected the house to be only 1200 sq ft gross living area. 1200 sq ft is the correct gross living area. The woman is suing for "fraud". It is all my friend's fault because he is the one who signed the appraiser.