Mike Kennedy
Elite Member
- Joined
- Sep 28, 2003
- Professional Status
- Certified Residential Appraiser
- State
- New York
Though focused on Commercial RE, the same elements apply to Residential
See:
"1. What is the appraiser’s responsibility?
2. Legal Precedents
3. Deceptive purchase agreements
4. Misrepresentation of property characteristics
There are a host of unfavorable property conditions that can be misrepresented by property owners, such as:
Legality of use. An illegal use, a use contrary to zoning laws or building and safety codes, can be discovered by local authorities, who might then force the landlord to remove the improvement and/or pay for conversion of the space back to legal use. This can often lead to loan losses for lenders, particularly with multifamily properties.
The drive to perform appraisals faster has caused some appraisers to skip the task of verifying that the existing improvements are permitted by the appropriate city or governing authority, which is easily verified on-line, by a Certificate of Occupancy, or a phone call to the appropriate department.
Some argue that lax code enforcement has encouraged buyers to pay full price for illegal improvements. In such cases, a “market value” estimate may be inappropriate for a lender client, as unexpected future enforcement of city codes could jeopardize these illegal uses. All it takes is one major fire or disaster to change the political climate for code enforcement. This recently happened in the city of Chicago as the result of a disastrous fire.
Be alert to clues of illegal improvements. For instance, a studio apartment without a thermostat, in a building with central heating and cooling, could be a walled-off master bedroom from another two-bedroom apartment. Some landlords do this because they can get more rent from a one bedroom apartment and a studio together than from a two bedroom apartment alone."
ABOUT THE AUTHOR: Vernon Martin, M.S.R.E., CFE
Vernon Martin, CFE, is the principal and founder of American Property Research, a valuation and advisory firm serving commercial mortgage lenders. He is a Certified Fraud Examiner (CFE) and certified general appraiser in several states and has a Master of Science in Real Estate degree from Southern Methodist University and an undergraduate degree in Urban Geography from the University of Chicago. He has previously functioned as the chief commercial appraiser at Home Savings of America, IndyMac Bank and Velocity Commercial Capital. He teaches part-time at California State University and has published in The Appraisal Journal, The Banking Law Journal, Real Estate Review, The RMA Journal, Fraud Magazine and Mortgage Banking.
https://www.hg.org/article.asp?id=7093
See:
"1. What is the appraiser’s responsibility?
2. Legal Precedents
3. Deceptive purchase agreements
4. Misrepresentation of property characteristics
There are a host of unfavorable property conditions that can be misrepresented by property owners, such as:
Legality of use. An illegal use, a use contrary to zoning laws or building and safety codes, can be discovered by local authorities, who might then force the landlord to remove the improvement and/or pay for conversion of the space back to legal use. This can often lead to loan losses for lenders, particularly with multifamily properties.
The drive to perform appraisals faster has caused some appraisers to skip the task of verifying that the existing improvements are permitted by the appropriate city or governing authority, which is easily verified on-line, by a Certificate of Occupancy, or a phone call to the appropriate department.
Some argue that lax code enforcement has encouraged buyers to pay full price for illegal improvements. In such cases, a “market value” estimate may be inappropriate for a lender client, as unexpected future enforcement of city codes could jeopardize these illegal uses. All it takes is one major fire or disaster to change the political climate for code enforcement. This recently happened in the city of Chicago as the result of a disastrous fire.
Be alert to clues of illegal improvements. For instance, a studio apartment without a thermostat, in a building with central heating and cooling, could be a walled-off master bedroom from another two-bedroom apartment. Some landlords do this because they can get more rent from a one bedroom apartment and a studio together than from a two bedroom apartment alone."
ABOUT THE AUTHOR: Vernon Martin, M.S.R.E., CFE
Vernon Martin, CFE, is the principal and founder of American Property Research, a valuation and advisory firm serving commercial mortgage lenders. He is a Certified Fraud Examiner (CFE) and certified general appraiser in several states and has a Master of Science in Real Estate degree from Southern Methodist University and an undergraduate degree in Urban Geography from the University of Chicago. He has previously functioned as the chief commercial appraiser at Home Savings of America, IndyMac Bank and Velocity Commercial Capital. He teaches part-time at California State University and has published in The Appraisal Journal, The Banking Law Journal, Real Estate Review, The RMA Journal, Fraud Magazine and Mortgage Banking.
https://www.hg.org/article.asp?id=7093
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