HELP - they want misleading description of improvements

[Ruth Langkawel]

A secondary lender that is involved with a loan that my best client is processing.

First they required that I revise the appraisal for the value to include only 5 acres instead of the 7 that is the subject. No problem, so long as I can report that the site is actually 7 acres, but at the clients request only 5 is considered in the value. Did it.

Next day they say remove the horse barn with with electric, and hot & cold running water, bathing stall and 2 horse stalls, and the vinly corral fencing and the pasture fencing (all new, at a cost in excess of $20,000, and estimated market value of $10,000). Okay. I removed mention of them from the market grid, cost grid, value, and additional features description. Then I created a caption in the comment addendum listing these items as existing, with condition described, actual cost from the owners statement and my extimate that the market would pay $10,000 for them, however, at the clients request they are not considered in the value calculation on this report.

NOW, they've faxed my addendum to my client with this statement circled and "This was to be removed. She just put it back in her "Disclaimer". And my client faxed it to me with a note to call him at home. :?

What do you all think about omitting these items without disclosing it? I just know I'm going to lose a client over this.

 

[Larry Lyke]

Ruth --

Ask your Client in a non-threatening way what they are intending to achieve.

AFTER ALL, Mr. Client-Loan Broker, the subject property is a Hobby Farm (or everwhat it is called in your region).

New aside:

Is the barn with the horse bathroom on the 5 acre parcel or on the 2 that're being shuttled to the quiet room.

I pitched a Client overboard last year when they wanted me to pick the best 120 acres out of a 1/4 section and model my appraisal after an appraisal done 6 months before by our leading-largest appraisal firm in the area; WHEREIN I pointed out to the LO that the loan they were re-doing was only for 80 acres of the whole parcel. Then he got in a rage and went someplace else. I tried to point out that that's what happened because somebody (him, of course) let the Appraiser describe the property being appraised and the Appraiser wrote up the legal wrong.

Also, the company that'd done the previous appraisal stripped the next year's appreciation out of the property anyways. And they have a reputation for doing just that.

As you've seen in this Forum, Ruth, on this issue, it's a hard place you are in. Your LO's trying to place the loan in a higher category of some sort to get a better rate for the Borrower (unlikely) or maybe a higher commission for himself (likely), or some such maneuvre.

Go for it. You're strong. Just play it cool. Don't lose your composure, you'll prevail. Join the Winners' Circle... with the rest of us.

 

[Pamela Crowley (Florida)]

Ahhh, Ruth,

I'm trying to stay calm here as I'm sure you are too.

I don't believe there is any way for you not to mention those items. There is no way it would not be misleading. You've done it correctly. It's now their problem and I cannot for the life of me figure out what their problem really is.

Just say 'No' and start looking for some more new clients. If this LO won't use you again because you insist on telling the truth, you don't need him. I really feel for you, myself and all other ethical appraisers that do what we must, do it well, and are blackballed for it.

I'm outraged!

 

[Dan/Fla]

When I am asked to not grid something I believe that has value, I honor their request.
The Statement I use is below, I put it on 1st page and most cases on 2nd or at top of addendum. it is always on the report in 2 locations.

PER CLIENTS REQUEST THE FOLLOWING ITEMS NOTED AT TIME OF INSPECTION, WERE NOT GIVEN VALUE IN THIS REPORT. _____ ____ ___ ____ ____

The 2 times I have had calls on it I tell whoever ask the client, it something like this is asked I always tell the client I am in middle of something and could you please fax me the change you want so I get it correct when I get back to office, every request I have ever got is in Black and white in my files.

 

[Ruth Langkawel]

I know I'm a bit battle weary on this subject. Last week I had an irate client because I would not include the legal description on my report because it was misleading.

They wanted only 5 acres and no auxiliary buildings included in the value. The subject is 17.5 acres, with a 2200 sf home on the north side of the property, and a large commercial building, housing their family business on the south acreage. The site has frontage on 2 roads, and a private road from one end to the other (the rear acreage can be accessed from the other road and is highly possible in this agricultural area to split the parcel). I recommended a survey to provide a new legal with the hypothetical 5 acres.

They are giving a reverse mortgage to an elderly couple, and one is ill. Their maximum loan is $65,000. The home and 5 acres is valued at $150,000. They want to encumber the entire parcel - with a combined value in excess of $250,000 - for $65,000! And they want me to provide the legal description on my report to assist in doing that!

Here's what I see happening: Dad is ill, he dies. Mom, dies 6 months later - broken heart. Kids, while trying to handle their grief, and keep the family business afloat, can't pay the $65,000 back in one lump sum - as I understand is necessary when the elderly borrowers of a reverse mortgage die (if Mom and Dad had it, they wouldn't be borrowing now). They lose the hole shebang - including the business that Dad built over 50 years, and the kids have worked their whole life at.

I won't have that on my conscience.

What the h*** is the matter with these underwriters?

 

[Pamela Crowley (Florida)]

Ruth,

I would definately take that one to the State of Michigan Attorney General! Pack of #&%*! THEIVES :!:

 

[Tom Hildebrandt]

Ruth

Just explain that USPAP and the federal guidelines requires that you address all factors that impact value, that you must therefore accurately describe the proeprty. If they want to place hypotheticals on that, then you can value it that way, you just need to disclose the hypotheticals.

Remember, the LO is not the only intended user of this report. the report will be seen and relied upon in the secondary market. Your obligation extends to those other intended users, not just your client. That is why the client ordered an appraisal for lending in the first place. If they were keeping the loan in house, they would not need a USPAP complaint appraisal.

If you loose a client over this, so be it.

Regards

Tom Hildebrandt GAA

 

[Larry Lyke]

Ruth --

Tell the UW you'll do it when she sends you a survey indicating the legal description of the property to be partitioned.

Since WHEN do the UWs get involved in this type of illegal activity?

By proceeding against this UW and getting as much as you can in writing, once the AG slaps their hands and they dismiss you from further work, then file a lawsuit charging them with distress, loss of income, 6-month of mental anguish, injury to your life-long self-esteem, etc. It could be terribly expensive. Would you like to OWN their loan brokerage? Of course, the attorney gets 40% of it, because you don't have any extra cash... YET!

 

[Caterina Platt]

Ruth,

Obviously, this is not in the owner's best interest. Larry took the words right out of my mouth. They've already gotten you to change the valuation to include only 5 acres. The legal should read something like ' a five acre portion of Tract 47, Map 333 containing the improvements described herein, of the total non-partitioned described parcel containing 17.5 acres'. I'm not a title officer or surveyor, that could probably be worded better, but something to make it very clear what is, and what has been done.

I've seen urban types get heartburn over the valuation of equestrian improvements. Similar comparables and an addendum stating something to the effect of 'some folks like boats, some like motorcycles, some collect classic cars, some keep horses. All require substantial investment, market recognition of such improvements has been proven with the provided comparables.' I'm paraphrasing and simplifying those that I've had to write in the past, but I'm sure you get my meaning. In other circumstances, I would suggest such an addendum with a bit of sarcasim eluding to 'if you don't buy this loan, someone will.' In this case, you have nailed a more disturbing, underlying problem. The owner's, or their heirs have a good chance of getting hurt. And you are being asked to lie to accomadate the likely thieves.

Since this is your best client, if you haven't already, I would voice my concerns and see what the reaction is. If the LO is a keeper, he/she will concur with you. If not, later days scum sucker! One slow month or two beats the consequences you may likely face. I agree that your attorney general and state financial institutions regulators may be interested in this. Sounds nothing less than preditory lending to me.

 

[Randy Beigh]

Ruth

Seems to me you have 2 different issues. The first one is whether you can omit acreage or outbuildings and I believe you can if the remaining appraisal is not illegal. By that, I mean if the zoning is 1 unit per 10 acres, then the whole 7 acres would have to be valued. Doing a "hypothetical" appraisal is ok, otherwise.

The 2nd is a different problem. A lender, any lender, that would ask you to not disclose what you are doing, needs to be fired.