Investor Giving Me Tons Of Work

[Ghost Rider]

Originally posted by Sue McHugh@Jul 6 2004, 08:12 PM
I was surprised to hear that "flipping" wasn't illegal. Had not a clue.

Sue - "flipping" is a totally over-utilized phrase to describe investor activity. It's kinda like the term "skippy" which is too all encompasing to be useful.

Flips can be entirely legal, the problems arise when mortgage fraud is tied in - Typically, you're talking about a straw buyer, an investor that can get homes cheap, and does next to work to them, and a willing accomplice in the way of a mortgage broker and appraiser.

Now, flipping has been used a term to describe legit rehab jobs, where the investor has done appropriate repairs, and the increase in value is justified. Where Kate's investor fits in, I don't know - I'd have to see whats going on before I could make that kind of judgement call.

 

[Scott Kibler]

Sue there is nothing illegal about buying property then reselling it for a higher amount.

The illegal part is due to fraud. Non disclosure of past sales and listings; falsifying loan documents, pushed appraisal values, straw buyers, etc etc etc etc.

 

[Kate]

OK, so what is a straw buyer? What EXACTLY does he do. So I know what to look for in the last hum, three to four months of solid work I have done for him?

 

[Ghost Rider]

Straw Buyer - Usually, it's just someone who exists only on paper. Good credit scores, and "appears" to be a perfectly normal buyer.

Kate, if you want to find out if there are some problems, pop into the town hall, and start checking to see if there have been any foreclosures and/or recordings of pre-foreclosure documents for those properties you have appraised - Look for filings of lis pendis against the borrowers for those properties you have appraised.

 

[Chris Colston]

Originally posted by Kate+Jul 6 2004, 08:57 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (Kate @ Jul 6 2004, 08:57 PM)</td></tr><tr><td id='QUOTE'><!--QuoteBegin-MHMerriman@Jul 6 2004, 07:53 PM
What you're describing is something that is being heavily investigated by various law enforcement organizations, including the FBI.

Are you serious?

I know that I was right in the first place when I mentioned the listing. Just couldn't find anything in skimming USPAP yet. Found the sales have to be listed but not the listings yet.

Anyway what exactly in what I described is what the FBI is looking at? Heavy investors in general?[/b][/quote]
Heavy investors using the same lenders and appraisers for every transactions. Purchases at very low prices, relisting in less than 24 hours at high end prices and selling at the high end after a very short period of time without so much as lifting a paint brush. Sometimes these "investors" buy back their own properties using false names and SS#s just to raise the values. Read some the fraud discovery posts and you'll see what the FBI is looking at.

You have to reveal the current listing....

Standards Rule 1-5 (this Standards Rule contains binding requirements from which departure is not permitted)

In developng a real property appraisal, when the value opinion to be developed is market value an appraiser must, if such information is available to the appraiser in the normal course of business:

(a) analyze all agreements of sale, options, or listings of the subject property current as of the effective date of the appraisal; and

{b} analyze all sales of the subject property that occured within the three (3) years prior to the effective date of the appraisal.

Comment: See the Comments to Standards Rules 2-2(a)(ix), 2-2 {b}(ix) and 2-2&copy;(ix) for corresponding reporting requirements relating to the availability and relevance of information.

 

[Kate]

Oh no now you really have me scared. Forclosures is the magic word. LOTS of the properties I have done are forclosures. Well lets see a total of 3 out of 10 or 11.

One I actually showed up unannounced to inspect a leaky pipe that was fixed from the effective date. While I was there the previous owner showed up to look for his cat. I believe that was absolutely a forclosure.

Another though that I am about to do is a guy who fell on hard times and is selling to the investor and then becoming the tenant until he can buy it back.

The last one is a death in the family/ the bread winner dies (I saw the death cirtificate) and wify couldn't pay. It is vacant now.

 

[CANative]

Your scenario is too complex to figure out on the internet. But if I were you, I'd keep my hands clean by accepting the assignment only from the lender, naming that lender as the client, and not communicating assignment results to the investor. This is, if the intended use of the appraisal is for mortgage lending. Also, as was advised above, make sure you have completed these reports in the best manner possible. You are required to analyze all sales and listings:

Standards Rule 1-5
(This Standards Rule contains binding requirements from which departure is
not permitted.)

In developing a real property appraisal, when the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business: (note13)

(a) analyze all agreements of sale, options, or listings of the subject property current as of the effective date of the appraisal; and

(B) analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal. (note14)

Comment: See the Comments to Standards Rules 2-2(a)(ix), 2-2(B)(ix), and 2-2&copy;(ix) for corresponding reporting requirements relating to the availability and relevance of information.

You would have to tell your investor guy that he should choose a lender and have that lender order the appraisal... hopefully from you, but nevertheless, the lenders choice.

See AO-25

The appraisal rules adopted by the Federal Financial Institutions Regulatory Agencies in August 1990 to comply with Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) impose a requirement on regulated institutions that "if an appraisal is prepared by a fee appraiser, the appraiser shall be directly engaged by the regulated institution or its agent…."(note75)

 

[DB]

Right on Greg!!

 

[Pamela Crowley (Florida)]

Kate,

Unfortunately, there are few 'investors' lately that are doing truly 'legal' flips. The fact that this investor has latched on to you, a newbie appraiser, is a red flag in itself. The number of properties he is dealing with buying and selling is another red flag and you can almost bet that he and his deal are or will be investigated by some law enforcement agency. He may be doing this legitimately. I have to doubt that since he's now asked you to ignore something you CANNOT ignore. Add to this the fact that he is ordering the appraisals directly from you prior to the lender ordering it..... scares me.

This sounds like a somewhat 'sophisticated' investor. In my experience, the more experienced the investor, the more s/he looks for newbie appraisers that don't always know enough about appraisals and the laws to catch on to the shaky deals they are playing with. They actually look for newbie appraisers, flatter them, and hook them into doing their deals for them. It's just so much easier to 'hide' the details when the newbie appraiser doesn't really know where to look. The experienced investor has so many tricks to pull the wool over the eyes of a newbie appraiser it would be impossible for me to come up with and list them all here. They LOVE the newbie appraisers and snicker behind their backs for the liability they are placing on the newbie that doesn't know it..... yet. I've sat in on investor meetings and some of their classes for 'newbie investors'. Made my skin crawl! So much so, that I seriously consider turning down all orders from 'investors'. I feel much safer this way. They don't want me anyway so I no longer need to think about whether to accept or decline these orders.... they just never send them to me.

Please be VERY careful with these!!!!!

USPAP:

Standards Rule 1-5 (This Standards Rule contains binding requirements from which departure is not permitted.)

In developing a real property appraisal, when the value opinion to be developed is
market value, an appraiser must, if such information is available to the appraiser in
the normal course of business:

(a) analyze all agreements of sale, options, or listings of the subject property
current as of the effective date of the appraisal; and

(B) analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal.

 

[George Hatch]

There are legal flips, and then there are illegal flips. Illegal flips are defined as such by the illegal actions that are taken to enable them. One example of an illegal action would be when an appraiser withholds disclosure on the listing history of the subject so that a potential buyer or lender is misinformed about it. Frankly, the corruption of an appraiser often starts with just such a request in reference to sales history. This time it's the listing history, the next time it will be something even worse. Don't do it and don't associate with others who do it. You are who you hang out with.

If there's a legitimate reason for the flaky sales history, the appraiser's disclosure and reconciliation of that reason should have no bearing on the valuation of the property other than to support a reasonable market value opinion. It's when information is withheld or otherwise obscured that the results can and will be called into question. That's when your utility as an appraiser (as an unbiased professional) gets compromised. Try to remember that there's no such thing as a secret anyway, and your chances for successfully pulling it off grow dimmer every day.

BTW, appraisals engaged by borrowers are generally not acceptable at lending institutions, both from a regulatory standpoint and from an ethical standpoint. Especially not if they involve putting a client's name on the appraisal to make it look like it was engaged by a lender when it wasn't. Hopefully you already know all the ins and outs of this, but by your description I'm kinda wondering where your appraisals are going and whose name is on them when they get there.