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Practical Way To Cut Down Fraud

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Travis McGee

Senior Member
Joined
Sep 18, 2004
Regarding the never ending cycle of bad appraisals and number hitters-I think one of the problems is the way the form is designed. Requiring only 3 comps allows too much lattitude.

Here's my thought- in addition to the slected comps, each appraisal would have to include a computer printout of ALL the sales in the past 6 months within the subdivision. Then an explanation from the appraiser why the comps close to the subject in livng area, condition etc WERE NOT used. This would expose "cherry picking" the comps. The attahced sheet would be a requirement, one that underwriters could be trained to look at. Any other suggestions of how the form itself could be improved?

My second suggestion might be impractical, but.....if state boards had the power to randomly pull appraisals from lender files and review them, the number hitters might be culled more easily.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
:rofl:

JoAnne:

I surely wish I had that sort of thing for all my work area... sure would make picking comps a lot easier...

Granted that some of my work area DOES have that... However subdivison is too narrow and 1 mile radius ios too broad and ....

I think we just have to use real appraisers to rat out the low-life (tho they would plead ignorance :rolleyes: ) folk who wiggle up around and through any and all sets of rules that one might develop!

Go figure.
 
Joined
Jan 16, 2002
They would just simply make up a phoney list of sales (phoney comps are already no problem for them), besides the lenders already have the ability to do that in many areas (useless BS data sources like Comps, Inc. e.g.) - no real data but at least a list of sales (i.e. addresses with dates of sale, and sales prices).
 

Dale Smalley

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
This is avaiable to the lender as an AVM which they can pay for themselves. SiteXdata is one that gives data maps and demographics. Lots of stuff to confuse them even more.
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
Good feedback so far- am aware of the weakness, but it could be refined- a way to tighten up the form. Also, I am aware that is what AVMS' include- one of the reasons they are considered reliable. So, perhaps...if we could be proactive and change our own forms and include some of data used by AVM's in addiiton ot our own development of value relying on 3 comps, it might make fraud harder to do. There is I beleive a real weakness in the current forms. So much tiem spent on flood zones etc, not enough on value. Like list to sell ratios, requiring listings to be included etc.

The current system of appraisers turning each other in is too weak, too cumbersome- just look around, it's not working. I guess my point is rather than just complain, we might free throw around ideas- maybe one or two will be winners and we can suggest them to the boards. Does anyone know who has the power to revise the form? Is it the appraisal standard board?
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Jo Anne

"Form" is usually a Fannie Mae or Freddie development just like it says at the lower corner of the forms... sadly Fannie & Freddie just want to get rid of us anyway.

I agree that something must be done. disagree with form changes being the best way to effect that change, tho it would help.

I use the demographic and sales specific parameters data to great effect in any review I perform.

Std 3 review can sure tell the 'rest of the story' ... I am telling one right now :twisted: .

The original appraiser's opinion of value might in fact be valid (mine is after all desk review) but I'd sure like to know why he was using 1200 SF 3 BR comps for a 920 SF 2 bedroom house with 42 sales in the last year in the 1 mile square area :rolleyes: . Were it me, and going that far to the upper end of possibility (not probability <_< ) I'd sure have spent a line or two on splainin' WHY.

jes in case it got sent for review :p
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
Hi Lee Anne. your example illustrates my point. If the original report had to include a mandatory attached sheet of all subdivision sales within 6 months, along with an explanation of WHY comparable sales within 10% GLA of the subject were NOT used, it would highlight comp cherry picking and discourage it (we hope).

I agree changing the form is not "The" answer. But as you said, it would help. Perhaps, instead of looking for one magic bullet answer, we need to instigate actions on a diverse area of fronts.
 

Pam Wyant

Senior Member
Joined
Feb 12, 2003
Professional Status
Certified Residential Appraiser
State
West Virginia
Joanne - your idea might work in larger areas, but around here I'm not sure where we would even get that data. Then there would be the explanations of why the $20,000 mobile home was not used since it was right next door to the 4,000 sf $400,000 2-story, which sits in the midst of several $100,000 ranches. This is a pretty common scenario, and doesn't seem to affect value or marketability by having these wide value ranges in neighboring properties.

We are often lucky to get a decent comparable within 15 miles. I can't imagine the nightmares that would be created in our area by a system such as you suggest. Fees would have to increase dramatically to cover the extra research, so before long the banks would be looking for a way to save the customer the cost of the appraisal fee by using an alternate system to a standard appraisal.

Random reviews could do the job if the lender would actually turn in the poor appraisals and if the state boards would really enforce standards.
 

GeorgiaBoy

Junior Member
Joined
Jul 23, 2003
Professional Status
Licensed Appraiser
State
Georgia
I agree that more reviews by our clients would help weed out some of the bad appraisers but only if the clients turn these reviews over to our state boards. However, "cherry picking" comps is one of the keys to being able to show ANY appreciation in a given market area.

Example: Lets say I am appraising a sale for 100K. Lets also say that I have three comps in the subject's subdivision that are exactly like the subject and sold within the last six months that sold for 92K, 94K and 96K. Would you disregard two of those sales and find two additional comps inside or outside the subdivision that would indicate a value of $100,000? Would you use the three comps and tell the seller that they were SOL?

Don't want to sound like a number hitter, but the real estate market is a dynamic not a static market. If we appraised as if we were in a vacuum we wouldn't be able to show any appreciation at all over time.

I am very interested in this subject. I know from reading this forum that you are extremely knowledgeable and am looking forward to your and others responses.
 
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