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Outright Fraud

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Atlanta CG

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Now, I've had it. I've been in this business longer than most on this forum, and have been fortunate to have appraised all types of homes, from those with a 2 year remaining physical life due to soil erosion & falling into the sea, up to multi million $ homes for those more fortunate than I. In addition, I've been a reviewer for a number of years. All reports can be criticized - easy to play the Devil's Advocate. Even reports that have had serious errors I have discussed in the reviews but have not reported any appraiser to State authorities, but now I've reviewed the most blatantly crooked appraisals I've ever experienced. All sales had asking prices around $270's, for months, with only lower offers. Then all of a sudden they sell for $350,000, to the same buyer. One of the subject houses had the front door open when I visually inspected it from my car and it was only framed on the interior, with rough stairs leading to the second floor. It was appraised at least $80K too high and was "as-is". One of the sales was even abandoned, with broken windows & open access to the basement, reportedly "sold" for more than $100,000 above the neighboring homes that were fully occupied. With the same buyer purchasing the homes from a "developer" , it appears to be outright fraud.
I remember from previous posts that there was mention of a group of Georgia appraisers who were formed to combat this, and wonder if it is still in existence. This time, I do want to report it, to authorities, or newspaper (if that's legal), or to whatever agency that is dealing with this.
Any suggestions?
Frustrated, poor, but honest John from Atlanta
 

J in Florida

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Please make as much noise as you can. I know this is said around here a lot, but it continues to get worse every day.
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
hey john

I have been in western montana for nearly 10 years; I perform a lot of repo's, relo's, and reviews. Appraisers here have buried a lot of people in their properties due to inflated appraisals. During this time I have submitted a number of bundles of appraisals to this state. The state does an average bureacratic job of handling these issues. The state can only legally handle USPAP violations.

On the fraud side you may get more relief (against buyer and developer...and loan guy). Go get em. You owe it to your community.
 

BarbaraNJ

Junior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
New Jersey
Honest John:

Only came across this situation Once (thank goodness) in 15 years; at least once that I was aware of (and caught). Client was a bank who "held all their paper" (did not sell loans on a secondary market) so it was not very fussy about how reports were done. My firm was their First appraisal company; prior valuations were done by bank personnel.

Anyway, there was a sale in a townhouse development that I sent an appraiser out on for this client. The appraiser could not find comps in the same town, and for many surrounding towns. He came to me for help. There was no realtor involved, just the developer's attorney. There were no comp sales in the development either.

Because I kept sending the appraiser back to the developer and attorney with questions, I finally got the answer but could not believe my ears.
The development was not selling. The buyers could afford monthly payments and wanted to buy a townhouse but had no money down. The developer and attorney inflated the price/contract so that the "sale price" was exactly enough for the buyer to borrow (@70%) the full REAL asking price.

I reported this to the bank and we refused to do the appraisal, followed by a letter explaining why. Funny part is that the bank president did not seem upset when I told him. I was kind of proud of myself for having uncovered the potential fraud, and while I didn't expect flowers I really wanted to hear "thanks very much" but didn't. Still don't know if the bank or the president were in on it.

It seems that your situation is the same; the price us jacked up so that a "dog" can be sold at the (original) asking price with the buyer able to borrow the entire amount. Everyone "wins"; the developer sells the home, the buyer gets a home with no money down and the lender gets the mortgage with interest income and servicing fees and the appraiser gets paid for the appraisal.

I encourage you to report this to anyone you can, but since this will make many people unhappy, don't expect the flowers.



____________________________

The Harder I Work, The Luckier I Get
 

Lee in L.A.

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
The developer and attorney inflated the price/contract so that the "sale price" was exactly enough for the buyer to borrow (@70%) the full REAL asking price.
Does the buyer not lose by grossly overpaying?

Developer and attorney, Ching Ching.

Maybe I'm confused :? Could there be such a thing as a crooked attorney? Don't they uphold the law? :lol:

What, me cynical? 8O :twisted:
Nah. :lol: :lol: :lol:
 

Larry Lyke

Senior Member
Joined
Feb 2, 2002
As long as the bank keeps it in their portfolio and has paperwork support (appraisal?) for the auditors, everything seems OK.

The bank is just "renting" the property to the "owner."

When he quits making payments, they'll ask him to execute a quit claim so they don't have to foreclose. Who know, maybe that was part of the original signing ceremony.

If he should make payments for enough years and seems interested in continuing, they'll make him a "real" loan.

It's quite profitable.
 

Paulette in Texas

Sophomore Member
Joined
Jan 24, 2002
very lucky...In metro areas like Houston: They are here and in abundance. I'm beginning to think the mortgage brokers or for that matter, the name lenders really don't care. They are in the "numbers or volume" closed business. I suspect they are bean counters thinking they can handle a certain percentage of loans going south. When it gets really bad where that loan going south just cost them $75k-$100k+ because they didn't care how honest or good THEIR appraiser was...then maybe they'll care about the quality of the work. Paulette in Tx
Rotts rule and Shih tzus here to stay.
go w...
 

MARKETVALUE

Sophomore Member
Joined
Feb 11, 2002
Professional Status
Certified Residential Appraiser
State
Georgia
John-

What development are you speaking of? Its not the condos downtown the AJC ran the article on last month is it? I would be curious to poke around and see if it's one of the usual suspects in this town or someone new. Our review biz has picked up greatly in the past two months, I now sleep alot better knowing that the worst appraisal to ever leave my office is leaps and bounds above the best paper our peers put out.

MRM
 

Atlanta CG

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
No, it is not the condos the AJC spoke about. You are right, however, about the reviewing. It has also made me more aware of the legitimacy of my reports, making them more specific to the area in which they are located. My reports lack boilerplate, but now I say even more about the neighborhood in general and more about the subject property, particularly if it is new construction. It galls me in reviewing a new construction appraisal that no mention is made of the upgrades on page one yet adjustments, sometimes significant, are applied on the market grid. Everyone should do at least a few a year - it can make us better appraisers in the end.
 
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