Inform someone or let it die????

[Pamela Crowley (Florida)]

Received order for a purchase in a slum area attempting gentrification. Purchaser is in AZ, said he's going to move back to Jacksonville; contract is on a single page over-the-counter contract. Lender is a big national name - the B-C end of the company. Received a check from the buyer already by mail.

Buyer scheduled inspection for me. 1st red flag is when he tells me he hopes I appraise it as high as possible. Hmmmmm

I go and do the inspection. Subject is one of the few old single story buildings in the area and the majority of it was added on quite a few years ago. Boarded up huge 2 family across the street, a couple of 2 and 3 story victorians that have been fixed up, most are still a major eyesore. (haven't found a single story comp yet) Major structural problems in the floor under the bathroom. I'm thinking the woman that lives there and let me in is the owner/seller until she tells me she plans on fixing the bathroom floor sometime in the next few months.

I start asking questions and find out she's renting this house and has been renting it for at least a couple of years, pays #372/month, month to month, with no plans on moving out. I ask who she pays the rent to and she tells me the name of her landlord - which is the name of the buyer.

I call the lender after I get back to my car and tell them what I've found out. The buyer calls me again to 'secretly' tell me that he's planning on moving back here to move in with the tenant who he had a previous relationship with, but he doesn't see any reason to tell this to the lender since it's none of their business. I explain to him that a tenant occupied property where the tenant has no plans to move makes a difference on how I must legally do the appraisal. He's not happy about that.

I explain the situation to the LO and we decide that I will do the appraisal without the income approach but that I will disclose what I have learned and let the underwriter decide what they want. She thinks this is just fine as the buyer qualifies with enough down to do it as an investment purchase if necessary.

Now.... (10 minutes after our discussion) the LO called and wants to cancel the order, will I please refund a portion of the fee that was already paid. Said she's going to drop the deal. I don't believe her and I don't believe the buyer. What I believe is going on now is that another less astute appraiser will be hired to get this past underwriting without disclosing the tenant occupancy. This feels very strongly like some type of investor scam.

Do I do nothing and just let it go including refunding a portion of the fee? Do I ask to speak with a supervisor and explain this situation?

Need some good advise here. My instincts have been screaming from the beginning of this, but ...... ????

 

[Mountain Man]

Pam, you are right that they WILL find someone to play ball. You did your job well and protected YOUR client. But it is not your job to police the whole town. I say document the heck out of your files for when the FBI comes a calling for a professional witness. Chances are that the LO has already posted this on their office buletin board under "check this crazy stuff out". If the LO is in on it, you can't stop it anyway. Like I said, they will find someone to help make the deal.

 

[Pamela Crowley (Florida)]

Thanks Mel, That's pretty much what I was thinking. Sitting here by myself when I start questioning what to do, this forum is the greatest!

 

[Tom Hildebrandt]

Pamela

Might I suggest that you write a short letter to accompany your invoice stating the basic facts regarding the issues described. No need to get into value type stuffs, but state the order was ultimately cancelled by so and so because they were cancelling the loan request.

Then you have truly executed your duties to the client. If you do not put it in writing to them, some attorney can make it look like you conspired (willful blindness) even though your intentions were honorable.

As an side note, I sold my triplex in Orange Park to a private investor this past summer, sales price was $60,000, no broker involved. Call if you want more details but this is good but hard to come by data in your market.

Regards

Tom Hildebrandt GAA

 

[Pamela Crowley (Florida)]

Thanks, Tom. I'd love to have the data on that one. There really isn't anything like it around here. The ones that might have compared were torn down a few years ago for a small hospital.

Congratulations! I'm thinking that was a good deal for you.

 

[David S. Roberson]

Please do not refund your fee just because you did the job you were hired to do. It would reflect badly on the whole profession, and give another lender ammo to try it on the rest of us.

 

[Larry Lyke]

Pam --

You got to get your priorities in order: [Smile]

#1: Deposit the check.

#2: In a few days send a paid in full invoice to the payor marked "Cancelled after job fulfilled."

#3: Tidy up by dictating a letter to the work file giving the chronological speil of stuff you will inevitably forget.

#4: Let the police come to you, if it happens.

 

[Stone]

I would love to be a fly on the wall at the next inspection. Will the tenant be there? Or will her story change to "I'm a friend of the owner, and he asked me to let you in." It would be so easy to keep an appraiser in the dark on the true occupancy of a house. Good work on your discovery...and keep the full fee. You definitely earned it.

 

[slacker]

Pam,

This has all the makings of a real stink bomb.

How can the purcahser be the current landlord? Is he buying the property from himself or is he just acting as an agent of the real owner? Or is he the original tennant who is sub-leasing the property to the current occupant?

And if the guy collecting the rent isn't the owner, who is?

I think the question concerning the Income Approach would have to take a back seat to the issue of who currently owns the property and why this transaction is happening in the first place.

 

[Pamela Crowley (Florida)]

I'm thinking one of the real issues here for appraisers is having others involved lying or hiding the truth is too often very easily accomplished. I am aware of what is going to happen with this deal. I'm safe because I will not be a party to it. How often should we be asking for the ID of the occupant?????? This is crazy and it's really not part of my job.

The biggest issue is finishing the appraisal and sending it in with all that was observed and all that was found out - WITHOUT CALLING THE LOAN OFFICER AHEAD OF TIME TO WARN THEM. We think we are helping by communicating with the loan officer (who is a representative of our Client, the lender) whenever we run into something that might kill their deal. I have been thinking more often lately that we are wrong in doing this. All we are really doing by giving them a heads-up like this is allowing them to cancel the real and correct appraisal so they can hire some other appraiser that knows how to ignore the problem. I don't for a second believe this LO is going to tell the truth to the UW, or anyone else for that matter.

I have a very good client that will not allow any LO to receive the appraisal ahead of the processor and would fire any LO that was caught trying to pressure the appraiser in any way prior to the appraisal being delivered to the processor. This is a lender that cares about not being caught up in any loan fraud and only the most trusted LOs are even allowed to order an appraisal. This is an excellent client even if they are slow pay they do pay for all appraisals at full fee with no questions.

My newest policy is that I no longer will communicate any potential problems to any LO and I will not stop the appraisal process along the way because the truth might kill the deal. I have an appraisal order - I will complete the appraisal and deliver it. The fraud is then smack where it belongs - on the LO.