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Kretschmar v. Pepe

A-4009-96T3 (N.J. Super. App. Div. 2000) (Unpublished)

FORECLOSURE; APPRAISALS—A lender does not have to accept an appraisal prepared for its borrower’s seller and may use its own appraiser, even if that appraiser is unlicenced.

A homeowner was in bankruptcy and had been given time to sell its property. It entered into a contract, which had a mortgage contingency provision that allowed either the buyer or seller to void the contract if the contingency was not satisfied. The buyer obtained a mortgage commitment conditioned upon an acceptable appraisal. The mortgage company engaged three separate appraisers, each of whom opined that the property was worth substantially less than the selling price. On that basis, it then withdrew its conditional loan approval. As a result, the buyer canceled the contract. The property was subsequently sold in foreclosure. The homeowner then sued the mortgage company on the theory that none of the appraisals met the standards set forth in the Administrative Code regulating real estate appraisers, essentially arguing that the mortgage company should have used certified appraisals in making its loan decision. Further, it sought damages for losses incurred by the foreclosure, contending that because the mortgage company knew of the pending sale and purportedly did not have the proper appraisals, it should be liable for negligent misrepresentation in using those appraisals as its basis to withdraw the mortgage approval. The Court rejected the claim as without merit, and rejected a related claim that a mortgage lender is required to use a certified or licensed appraiser. Even though the homeowner had an earlier appraisal that seemed to show a sufficient value, the Court held that a prospective mortgagee does not have to accept a seller’s appraisal and is entitled to rely on its own appraisal. Further, the appraisal supplied to the mortgage company was for its own benefit, not for the benefit of the buyer or seller, and it could use any appraiser it wished.


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