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red flag on first report?

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robert hoagland

Freshman Member
Joined
Jan 27, 2003
Professional Status
Certified Residential Appraiser
State
Connecticut
Sitting here doing my first report and trying to impress my mentor with thoroughness. I thought it was your typical URAR until I researched the current owners purchase of the subject. Five months ago the current owner purchased said subject for $8,000, apparently a tax defaulter looking to get out. Mr. current owner put in $15,000 to fix the place and now I am ready to put a value close to $90,000. The subject, in my opinion, is worth it. The comps and research back me up. Does the $8,000 purchase price send up a red flag? How should I word this in the "analysis of any current agreement..." section?
 
B

Bemis Pownall

Guest
Disclose it and explian it just as you did here. If they(UW or investors) have anymore questions they may come to you or the homeowner. Make sure to disclose. Looks like you should charge double appears homeowner can afford it.
Good luck
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
In my experience, the UW will want to know the circumstances of the $8,000 purchase and exactly what was done to make the place now worth $90,000. Be as specific as you can.

Welcome to what real appraising is all about, right at the beginning!

Good luck and let us know what happens.

:D
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Make sure you put in some extra wordage to the effect that you are not responsible for clear title and you asked about arms length,

aaaandd you really really carefully researched that estimate of value.

That's an incredible spread on the return...

67 K of profit?!?!?! on a 23K investment?!?!? 8O

Sing me UP
 

TEL2002

Elite Member
Joined
Jan 16, 2002
Professional Status
Retired Appraiser
State
Louisiana
You might double check the sales history of every comp to make sure none of them are flips. If possible use nothing but MLS sales...now you can ask the RE about the deal, etc.

I hope you have lots of interior photos to back up the condition and quality that equates to $90K.

Good luck.
 

vargasteve

Junior Member
Joined
Jan 21, 2002
Professional Status
Certified Residential Appraiser
State
California
did you mean to say $80K not $8,000
 

xmrdfghap

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Florida
Although the numbers are significant (would you have the same problem with a $6,700 gross?) there are circumstances where the guy just happened into a good deal.....seems this is one of them. Explain all you have explained here, but make sure you address the right of redemption and make sure that the window of opportunity for redemption has passed. Otherwise, if the house was sold at a legal auction by the legal taxing authority I do not see what the problem is. Yes, $67k is a nice profit. But nice profits are not a bad thing, are they?
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Couldn't be $80,000 wouldn't make any sense. Also did the investor do all the work himself? What is five months of labor worth? Most people I know who do this sort of thing look for a 20 to 30 percent return not including their labor and expenses.

In any event, yes. I will raise all kinds of red flags. The very reason we have this 3 year requirement now. Do your appraisal carefully, support your value conclusion, explain, explain, explain, and then let the chips fall where they may.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
If possible use nothing but MLS sales...

Here, the areas with lots of investor activity are usually loaded with erroneous MLS data too!

Example:
MLS listed at $25,000.
Sold at $62,000.

:?:

Investor found the listing, made a 'deal' with a buyer to fix the property and sell it for $62,000. Investor sat in a room next to the closing, seller signs deed for $62,000 (deed actually says $10.00 and other consideration) and somewhere in the shuffle of all that paperwork is a check from the seller to the investor for the difference. Realtor flat out refuses to answer any questions regarding this sale.

OR: Listing agent used REO sales for their CMA when listing the property and sold a perfectly good 'average' condition house to an investor (and somewhere along the line got a nice kickback or is a partner with the investor). Investor then re-sells this property the next month for $20 - 40K more.

The north side of Jacksonville is so overloaded with these scams that it's now about 50 sales to MAYBE 1 qualified arms-length transaction. Shoot, just finding and checking out these frauds would be a full time job!!!

Double and Triple check those comps!!!! The Underwriters will and that you can count on! Just be very, very careful!!!
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
robert, ........While you are researching the comps, be sure to inquire about seller-paid-closing-costs and any other concessions which may have trickled into that final posted selling price. I just did report on property in a solid $95 to $115K neighborhood. I called agent on all 3 sold comps and found SPCC of $2,000, $3,000 and $3,600 ! That's basically 2% to 4% of the posted price "hidden" because the agent added that amount to the final price they posted in the records. I really do not know why they are so adamant about revealing this aspect of their transactions in the "public" medium (the MLS records)......until they are directly asked by a researching appraiser.
 
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