NEGLIGENCE OF OTHERS

Is a broker liable for the negligence of third parties, such as appraisers? As a general rule, a person is not liable for the negligence of other people, unless they are his or her employees. Because brokers are fiduciaries, however, they may be liable for the negligence of independent contractors.

In Barry v. Raskow(1991) 232 Cal. App. 3d 447, a broker persuaded a client to make a loan, which was secured by real property. The broker told the client that a third party appraiser had valued the property and that there was plenty of equity in the property to cover the loan. The loan was made, the borrower immediately defaulted and the property turned out not to be worth enough to cover the loan. The Court of Appeal found the broker liable for the negligence of the appraiser. The Court reasoned that the broker had more knowledge than the client, and that the public would be better protected if brokers were given the responsibility to make sure they employed only competent independent contractors.

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