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Appraiser Fraud...What would you do?!

Discussion in 'Urgent - Help Needed' started by mikerorwick, Feb 25, 2006.

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  1. mikerorwick

    mikerorwick New Member

    0
    Dec 22, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    This is an odd one:

    I'm appraising a condo in a 6 unit development, built in 1980, in Manhatan Beach, CA. It was built as a condo but has been used as an apartment, as the white slips were not finalized until recently. This is the 1st time the units have been on the market as a condo.

    Because it just recently aquired full condo status, public records does not yet state individual sq.ft. per unit.

    The listing agent states sq.ft. is 1,450 sq.ft. in the MLS. This is wrong. I measured 1,270 sq.ft(@ 16% difference). Here's where it gets interesting:

    The listing agent has her own appraiser taking care of 5 of the sales and was very upset with the broker who insisted on using me for the 6th appraisal. As it turns out, the other appraiser is overstating sq.ft. on the units and told me personally,"Yeah, the agent was really concerned with the sq.ft. coming out at 1,450 sq.ft." I called him today and we went over his measurements vs. my measurements. I went out to double check today and have 100% proof that he is overstating sq.ft. on one of the closed sales. I'm relatively sure he is doing the same on all of the units. This property is one of a kind and no true comps are there aside from the sales in the building. My problem is that knowing what I know, how can I accurately appraise this property when I know that sq.ft. has been overstated in the comps in the same building??

    I notified my client that the property has been misrepresented to the buyer, both are furious. The agent is in the process of changing the MLS info. I sensed this agent was very unscrupulous from the get-go. My client wants me to proceed, but I'm not sure how to handle this one. The most obvious thing to do is fing similar properties with similar sq.ft. outside of this development. The problem is that this place is truly 1 of a kind for this area. I'm debating using competitive cities, but then the question comes up of why I'm not using the 2 sales from the building that sold this month, along with the pending sale. I really feel like reporting everyone and writing letters to the recent buyers who think they have a 1,450 sq.ft. condo.

    Any advice is greatly appreciated...And thanks for reading this long post.

    Thanks!!
     
  2. Tom Barclay

    Tom Barclay Senior Member

    0
    Apr 7, 2002
    Professional Status:
    Retired Appraiser
    State:
    Oregon
    While I can appreciate your concern about the difference in size, unless there is undue influence, the buyers of these condo's all paid a price for what they believed was a reasonable price for the utility, not the price per square foot. If your measurements are correct then the previous buyers paid a higher price per square foot for the same utility. Just a thought.
     
  3. Carnivore

    Carnivore Elite Member

    4
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    above all else...

    Make sure you have all your ducks lined up in a neat little row.

    The agent and the co-conspirator Appraiser are very likely to find themselves in court in the very near term. There is a ton of case law on this very topic. Plenty of SOL real estate agents around the country have paid dearly for this lesson.

    This might e a good time to amend the appraisal order with a detailed engagement letter spelling out court time!

    I mean this with all seriousness. This story will eventually come out when these condo owners have a complex party. Then it will become a class action and you want to be on there side!!!

    ps. Make a file with all of the old MLS data. This information will be like gold to the plaintiffs attorney down the road.
     
    Last edited: Feb 25, 2006
  4. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    First, since you already KNOW the sales in the subject project have been misrepresented by the real estate agent AND the appraiser, turn them both in stating just what you know and who told you what.

    Finish your appraisal prior to doing this using other sales from outside of this project and stating the closed sales within the project are not used due to information received that they might have been misrepresented.

    I know it won't be easy, but do what is right by finishing this complex appraisal then help everybody else by also doing what needs to done by filing the complaints for OREA to investigate. I foresee a multiple complainant suit coming up against the real estate agent, the other appraiser, and the seller.
     
  5. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    Tom got the numbers reversed: larger size usually means lower price per square foot (Usually).

    Next, I agree with Andrew and Pam, but in different aspects.

    1.) Like Andrew said, I'd insist on a new engagement letter to cover any lawsuit and court case aspects (it will happen - almost 100% sure);
    2.) Document all conversations, emails, letters, etc., even the ones already had (sit down and write the date, times, person, conversation, etc.);
    3.) Should you decide to proceed then follow "Fannie" Guidelines for the forms and calculations (since you're putting on the fannie form) as well as ANSI:
    4.) Make sure your file is completely in order;
    5.) Check on a regular basis for the recording at the clerk's office for the size;
    6.) Get your head checked;
    7.) Then, if you're still inclined, file the complaints and get ready for a bunch calls, threats, etc., but at that point you've gotten your files in order (hopefully).
     
  6. xm39hnu

    xm39hnu Senior Member

    0
    Jul 10, 2003
    Professional Status:
    General Public
    State:
    Florida
    Since this is going to be an appraisal where exact data are needed, my first choice would be to knock on doors. Introduce yourself to the residents of those two closed sales, tell them why you're concerned, and ask for permission to measure their condos and get a look inside. Ask whether they've done any upgrading since they moved in, and representations made to them at time of sale while you're at it. If you're feeling really froggy, write down what they tell you on a separate piece of paper and get them to initial or sign it. If you can get these data, your problem is simplified and the other guys' geese are cooked.

    Kinda nice when you turn in a report where the data on the two best comps is sourced as "Interior observation; owner-occupant."
     
    Last edited: Feb 25, 2006
  7. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    Damn! I've done what Jim Plante said to do and didn't think of it until he wrote it. Do that with both of the solds and then I would use only 1 of them as a comp because of the GLA discrepancy.

    I wouldn't need a new letter of engagement as, IMO, putting directly in your report and on a page of the form plus in any addenda that any further time wanted by anybody, including discussions, depositions, court time, preparation for any further action, etc., regarding this appraisal is NOT included in this original assignment and invoice. Anything further wanted regarding this appraisal and/or the subject property and/or project is a separate assignment and WILL be billed on an hourly basis with a minimum retainer of $1,500 to be paid in advance.

    Might want to reword that a bit as needed or with an attorney because I just wrote it off the top of my head. Then, STICK TO THAT AND DO NOT DISCUSS IT WITH ANYBODY WITHOUT THAT RETAINER BEING PAID.

    I truly believe this will be going to court, or at the very least legal mediation and you will be dragged in. Lucky you, I would relish this as fun and lucrative!
     
  8. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    I forgot to mention Jim's approach as well. I've knocked on the doors at condos and offered a free floorplan sketch, expressed concerns that the HOA might be overcharging due to size being shown as larger than the unit might actually be and other factors. However, unlike Pam, I would want to have that engagement letter drawn up before proceeding much further as it will most likely be going to court.
     
  9. Lloyd Bonafide

    Lloyd Bonafide Senior Member

    0
    Jan 15, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Mike -

    We all know it's not inusual for an agent to overstate the square footage, especially since the public records do not show the size of the individual units yet. Who knows where the figure came from. The original plans were done in the late 1970's. Sometimes architects don't deduct stairways or open areas from the second level.

    I'm going to assume that all of the units in the complex are the exact same size, and that the agent and the other appraiser know the units are smaller than stated. What I would do is: use two of the recent sales in the complex as comps with the actual square footage instead of 1450 sf, then use two or three similar sales from outside the complex. If the four or five sales all support your sale price, I don't think you have a problem with the sale price of your unit. The buyer of your subject property is going to know the size is smaller. Whether they decide to complete the purchase is up to them.

    I wouldn't contact the other buyers in the complex. I would just be concerned with the unit I am appraising. If you feel you should file a complaint against the other appraiser, go ahead. I probably wouldn't file a complaint with the OREA. Let's face it, the OREA is probably not going to do much with a dispute over square footage of a condo.
     
  10. mikerorwick

    mikerorwick New Member

    0
    Dec 22, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Thanks for the advice!

    I like the idea of offering the buyers of the recently sold units a floorplan sketch, I will do just that. I will also be sure to have proper verbage in the report regarding the retainer fee, etc. I will also contact my client to revise the engagement letter. Any advice on how to approach this would be appreciated. I really feel the agent/appraiser should be turned in, unfortunately, I also see Stephen Jones' point about OREA not really doing much over this. That being said, I will be sure all of my ducks are in a row for if/when this goes into litigation. Pam, my wife agreed with you, she said, "This sounds like fun." I'll keep the forum posted, especially if it goes to court.

    Thanks to all of you!!
     
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