New contract and USPAP?

[Tim Hicks (Texas)]

Well, a little help please. I had an appraisal assignment where the borrower was less than co-operative. He was supposed to meet me at a property and pay at the door. He gave me the lock box combination and never showed up. I held out to finish the report until I received a check. During one of the four phone calls prior to the inspection he told me the sales price was $124,000, but it should appraise for $130,000. After I inspected the property, I realized this guy was as dishonest as you can get. This was a foreclosure quality property that need cosmetic repairs. There was a real estate agent involved, but no MLS listing. I held out for a sales contract, which made the lender mad. The day they received the contract, they faxed it to me. It was $93,000 and I completed the report with only one sale that needed cosmetic updates and arrived at a $107,000 value. Of course, the borrower was angry and he said I unfairly valued his property. They had the agent fax me some comps. All of the comps were updated or remodeled homes,or had pools, none of them from the subject addition. I told them to forget it, that none of those sales were similar to the subject in any way. Now, is where the problem starts. A week later they fax me a new contract with a new sales price of $107,000. That is not a problem to me since I appraised it for $107,000. the problem is I say that I must disclose the previous contract in the report. They say I am mis-interpreting my rules and guidelines. I just looked at my USPSP Q & A and it says the appraiser must address any current contract, listing and sales history. Needless to say, the lender and I are parting ways over this issue, but I would like to know if I am interpreting the rules wrong. This is a "high maintenance" lender that I will not miss, but I would like to know I am right, too.

P.S. They are also mad because, mentioned a property is listed for $77,900 on another appraisal and the sales price is $81,500. They think I am trying to shoot all their deals down with my verbage.

 

[George Hatch]

Do you want to try and explain to a state board how the original pending sales price, which is written down on a sales contract somewhere, is not current information given the requirement to analyze and reconcile all sales within the previous year? The sales history of a property is considered so important to competent appraisal practice that there is currently consideration of increasing the requirement for residential properties from one year to three years. The listing history in this case would definitely be of interest to any lender and their auditors and will probably would affect the terms of the financing if they ever learn of it. It's so relevant to the current contract price that failure to disclose it would be considered by most appraisers, lenders and federal banking regulators to be misleading at best, and maybe even fraudulent.

Full disclosure shouldn't kill the deal, though, as long as the borrower had the ability to follow through with the original transaction. There is no good reason to not disclose, and plenty of reasons to disclose. Not the least of which is to CYA.

Say one of these deals ends up going down in the next 2 or 3 years. When the deal gets examined and it comes to light that you were familiar with details of the listing and sales history but did not disclose it, how will that reflect on your opinion of value? Even though your value hasn't changed, it might appear to the lender and the federal regulators that you hit the requested number. And for what, so the client won't have to explain how your appraisal actually affected the closing sale price or their financing? This kind of situation is one of several scenarios that contribute to Fannie thinking the appraisal always hits the sale price. If your client were doing business the right way, they would be able to reconcile these elements and make a solid loan. But that kind of work isn't their goal. They want to swerve the system and deceive their lender; and they want you to do the dirty work so that they can later claim ignorance. Plausible deniability. It will all become your fault and your responsibility.

You have a client who is asking you to exclude information about the subject's current sale that you are aware of. And then they have the nerve to suggest that if you make a full disclosure, this will kill their deal. I say that if this deal is dead, it died at their hands, not yours. What's next? Are they going to ask you to overlook the poor physical condition of the house in the next assignment, or the missing appliances, or the train tracks? You bow to this once and you might as well put a 'Welcome' mat on your back.

This client is asking you to withhold information on an appraisal. In so doing, they are willing to put your license, your professional standing, and your livelihood at risk. This is not ethical behavior by any standard, particularly not ours. In my opinion, you should either draw your line in the sand right now, or fire them. If they are behaving unethically with the appraiser, they are also doing funky things with credit reports, financial statements and everywhere else. You are known for the company you keep. If you continue to associate with these guys, your name will be tied to theirs at every lender in town. Once word gets around that these deals are getting funded and your name is on the appraisals, you will probably end up losing all your good clients. The only new clients you get will be idiots like this one and the only deals you'll get called on to do are the dirty deals. The good deals will be done by someone else. Not to overdramatize, but this one deal and this client could be a turning point in your career.

I repeat; either straighten these guys out quick, or fire them.


George Hatch

 

[Tim Hicks (Texas)]

George, I don't believe I was clear enough. It is the same seller and borrower, too. I can see where they whited-out the first contract. Now, I don't know if there is anything fishy going on. The lender is trying to say the contract was a work in progress. I think I should just disclose and let them explain. The lender is intent on complaining that I am mis-interpeting my responsibilities because of the way the form is worded (read "current" contract). I think the current contract is the one I had before the effective date of the appraisal. The lender wants me to show them where it is printed that I have to disclose a previous contract (regardless of buyer) and of course everything I come up with has "current" contract in the verbage.

 

[Tim Hicks (Texas)]

George, I read your post too quickly. I agree with everything you say. i was just frustrated (as usual) because I want to show them in printed word why I can not do as they ask, so they can quit their ridiculous request and I can move on. I had already decided I did not want to be associated with this lender anymore, but they just will not go away peacefully. They try to insinuate that I did not do the jobs I performed for them already in a professional manner because I volunteer too much information that they say is not pertinent (cost to cure, previous listing, contract history, etc).

 

[Pamela Crowley (Florida)]

Tim,

You hang in there with your ethics. I think you are correct as the first contract price was prior to the effective date of the appraisal, the second one, if you change your report, was done to match your value, isn't your problem and would need to be disclosed with the changed report having a new signed date. YOU are doing the right thing. They are scum.

Welcome my world of being blackballed. I hate it yet I'm becoming quite proud of it at the same time. It's tough either way but, easier for me to be blackballed, lose work and still live with myself and sleep well. The alternative is not an option for me. :twisted:

Still hurts to be slammed for doing what you know is right. Kinda feels like being sucker punched. I salute you!

 

[airphoto]

Tim,

You've been paid for the first appraisal, correct? Terminate the beggars NOW! Let 'em find another appraiser to do the updated loan. Your assignment has been completed!

 

[Larry Lyke]

Tim --

Has the check cleared?

Find another client.

The commission parties had already decided you were right when they tried to include the difference between 93 and 107 as equity and don't want that potential commission to go down the tubes!

I sure do like George's take on your situation.

There's literally 1,000s of Lenders out there. Honest ones. Solicit a few of them. I find every time I've sought ONE new client, I'd end of with a half dozen and you have to pick among them. The reason is the Lenders themselves pass along your information locally via back channels. THEY know who the GOOD guys are. Pam's right.

Having said all of this, I recognize fully that I've had the pleasure of operating in one America's best regions since the Beginning of Time ... BUT the sleazebags still hunt you down. Now they even have Web sites.

Work the Web a little yourself. Although, I have no firsthand knowledge, I am absolutely positive you can attract some activity from the Web. Without a site myself, I've even done a little bit since last summer.

Much to my surprise I have a brand new client 2,000 miles away who only does C.O.D.'s and EDI and is ONLY concerned about DELIVERY. I'm still scratching my A... aching forehead about how this one came about. Ain't gonna ask until someday when we're having a more casual conversation about an appraisal. They don't even call to check on the schedule. Of course, I fax a confirmation of the order and confirmation of contact and delivery reserving the right to alter either based on follow-through.

Stick you boot up their... and cash the check. Sounds like a song coming on...

 

[Wally Jones]

Tim,

Sounds like you've decided what to do about any future dealings with this lender and you've received some positve support from previous posters. If you still need some "printed word" stuff, how about something from the lender's rulebook? Fannie Mae Selling Guide, Part VII, Chapter 2:

"The lender must disclose to the appraiser any and all information about a security property that it is aware of if the information could affect either the marketability of the property or the appraiser's estimate of its market value. Specifically, the lender must make sure that it provides the appraiser with all appropriate financing data and sales concessions for the subject property that will be, or have been, granted by anyone associated with the transaction."

Or, you might express your concern that you were trying your best to comply with Fannie's recent "Announcement 02-02" in which it was indicated you might have your report turned over to your state's regulatory board for "lack of analysis of, and reporting on, the listing, offering, or contract of sale for the subject property" (page 2).

Not sure if this helps. Good luck.

Wally

 

[Pamela Crowley (Florida)]

Very good answer Wally. I think that one is worth saving and printing for future use. Thanks!

Will you be in Orlando on 4/2?

 

[Wally Jones]

Hi Pam.

Thanks. Hope it helps Tim. The lender is so worried about what our guidance says they sometimes forget to look in the mirror. Reckon we're all guilty of that sometimes, though!

Still planning to be there on 4/2. My partner is going to Hawaii that week (durn, I didn't know our business had been THAT good! ), so there's still a small chance I'll have to (gulp) work. Have tried to keep the calendar clear, though.

Wally