Sniffing Out A Scam (or Situations Where You Really Need To C.y.a

[VALU8]

I was reading through some nightmare appraisal stories and it's piqued my curiosity...

Any of you guys spot something really fishy going on? Good stories? Anyone ever try to pull a fast one on you?

What are some red flags to look for?

What are some ways people might strong-arm, trick, or manipulate you into doing something unethical/illegal or get you sued to the stone age and or/lose your license?

 

[Terrel L. Shields]

Anyone ever try to pull a fast one on you?

I was asked to value the mineral rights under a tract of land that was in an area of marginal oil and gas activity. The O/G wells in the region were shallow, less than 2000' deep, and produced modest amounts that were economic, but hardly anything to write home about. The client was a title re-insurance company that said they were trying to negotiate with the buyer as the title insurance had warranted that the mineral rights were intact and they were not. Farm Credit had retained the minerals when they sold off a repo farm. The implication was that they were trying to buy the minerals from Farm Credit to restore the minerals to the insured party. I was completely clueless that this was not the case.

I got a call a few days later from an old professor of mine who was a consultant for the buyer who was suing. He asked me if I understood what was at stake. I said clue me in. The buyer had bought 480 acres and the title company had explicitly been given the task of determining the mineral rights. They missed 80 acres right out of the middle of the parcel. The buyer had spent $250,000 drilling test holes to determine the extent of limestone, because the buyer was the owner of a quarry company. They wanted the limestone, not the oil and gas. They had the reserves estimate which was millions of dollars worth of limestone which was now worthless because this 80 acres was critical to the very location of the mine. I was told nothing about any value to minerals (since they have reserve estimates, it is a valid "value" for the mineral rights.)

I withdrew from the assignment. The opposing lawyers got wind of my withdrawal and subpoenaed me to a deposition along with the old prof. I said that when I was informed of the extent of the litigation, I felt I was not competent as a quarry appraiser to comply and did not have access to the reserve estimates and was not informed by the title re-insurer that the issue was stone, rather was given the idea it was oil and gas...which would have been a much lower value than the proven reserves of stone.

 

[CANative]

Lot's of really crappy properties with serious issues. Way more than typical (as a percentage.) A fairly good AMC client whose client is also a decent lender type I've worked with for years, gave me an assignment. Wanted it as multi-family. But it's just an old farmhouse with half of a detached garage converted to a 1 bedroom ADU. And the zoning is Service Commercial which has no allowable residential uses. The house can probably be rebuilt but I don't think the the City has to allow the small ADU under the second unit laws where zoning is non-residential. We went round and round for a few days. Then I get a request for the same property from a DIFFERENT AMC but the same lender.

:/

 

[VALU8]

Hearing stuff like this took me from cautious to paranoid I think.

Completely hypothetical for the sake of discussion- Anyone ever have a home owner who's taking a loan out on a property they've owned forever, and ask you to NOT include an ADU because it's not permitted? If someone were to do that I would raise an eyebrow. I would expect them to be pointing out that they used the fancy paintbrush instead of the cheapies and that you can really see the difference in the stucco texture kinda thing.

 

[Overimprovement]

Be wary of basements whose walls appear to have been recently paneled--could be hiding serious foundation issues. Course the owner will pass it off as--these are just some of the updates we've done...

Diagonal cracks above doorframes, and windows/door that may not open/shut the right way are some signs. Check closet ceilings too--most people don't think to sand and repaint those, only the 'visible' cracks.

Even though we are not home inspectors, nothing stops a buyer/seller from suing us if something is not as it should be.

One more thing--be wary of the shared driveway. Never assume there is legal/recorded ingress/egress. If nothing else, at least draw attention to it in the report, and suggest it is assumed there is proper ingress/egress, but that you are not a surveyor, yadda yadda...

 

[CANative]

Be wary of basements whose walls appear to have been recently paneled--could be hiding serious foundation issues. Course the owner will pass it off as--these are just some of the updates we've done...

Diagonal cracks above doorframes, and windows/door that may not open/shut the right way are some signs. Check closet ceilings too--most people don't think to sand and repaint those, only the 'visible' cracks.

Even though we are not home inspectors, nothing stops a buyer/seller from suing us if something is not as it should be.

One more thing--be wary of the shared driveway. Never assume there is legal/recorded ingress/egress. If nothing else, at least draw attention to it in the report, and suggest it is assumed there is proper ingress/egress, but that you are not a surveyor, yadda yadda...

Scope of work and clarifications.
The purpose of the appraisal is to develop and report an opinion of market value for the subject property as defined herein. The intended use of this appraisal is to assist the lender/client, identified in this report, in evaluating the subject property as collateral for a mortgage lending decision only. There are no other intended users and there are no other intended uses communicated by the client to the appraiser at the time of the assignment. Any party other than the identified intended user contemplating the use of this appraisal is urged to seek a separate appraisal which has been prepared for their specific needs. A real estate appraisal does not guarantee that the property is free from defects.

 

[J in Florida]

I would imagine most of us could write our own books with all the BS we've experienced over the decades. One of my favorites was the "decorating allowance" addendum that never made it to the lender. Another one was Peter Falk's ex-wife buying a "second home" in Longwood while living in LA. Now there are plenty of legit second homes in the Orlando area, but Longwood-Lake Mary-Casselberry are not those areas. But what would I know about the local market, I'm just the greedy real estate appraiser who wants to kill deals so they can get their $300 whether the deal closes or not.

 

[Terrel L. Shields]

Did a loan appraisal on a farm and then got subpoenaed to testify months later when the couple split up. The judge was completely unsympathetic to my complaint that I was not doing that appraisal for a divorce. But the old lawyer literally starts crying that he was unprepared to examine me, that I shouldn't have been allowed to testify, and this was after the plaintiffs lawyer (who had subpoenaed me) had examined. The judge hustles the two back in her chambers, and I sit on the witness stand in limbo. About 45 minutes later, they come out and she sent me home...??? Never did know what happened.

also, nice to have paperwork on something like a home inspection or termite inspection. I had noted a soft spot in the kitchen floor and recommended an inspection. They had already sent a termite guy there. He said it was free of termites. But the insurance man found the same soft spot and called out his own termite man who pointed out that the joists were not marked and you had to dig out (old house without original plumbing) … no one had been under there. It went to court (I was paid this time) but I was just surprised that the termite guy was the only one being sued.

 

[Tim The Enchanter]

Did a 7 figure place in La Canada, the guy pointed out 17ish terrible expensive problems.
On further review, I found it was mostly BS and a letter from the city he gave me requiring retaining wall work was dated and the work had been done, per the City.
So he wants a lowball appraisal, it was a distressed property. He did not get his wish, I busted him.

Another was reverse staged. Looked like they had a blowout party the night before and did not clean up yet.
Guess what, I am very experienced at ignoring your personal property.

 

[glenn walker]

Once did a 2055 Exterior and when I pulled up to take street and front photo a neighbor asks me what I am doing ? I hand him a business card and tell him why I was taking photo - The guy then says nobody has lived in that house for at least a year or more . I said really and he says no they tore the rear of the house off and the previous occupants gutted out the inside clear down to the studs. I asked if they were remodeling and he says no I live directly next door and there have been homeless people sleeping inside it at night .he said he called the city and police but nobody seems to care.

Finally I said OK so there is no house just a front and two side walls ? The guy says yes walk over to my house and from the back yard you can have a perfect look for yourself. Sure enough the back of the house was gone. I had also noticed the electric and gas meters had been removed. Anyway I contacted the lenders POC and informed them there was no house just a shell and by the way the guy reacted it was clear he may have been part of the scam because he told me i exceeded the scope of work.