Testing Our Character

[Barry Kirsch]

We have an interesting quandry....

We did an appraisal 9 months ago that was "subject to completion." The loan had trouble closing, so they asked for a recert, we did recert it, but they said the recert wasn't good enough and they ordered a whole new appraisal. All the remodeling had been done except for the flooring.... the floors have hardwood floors, but it has that sticky glue on them....the new appraisal was subject to completion, fixing the floors...then they wanted us to make it a cost to cure, we said OK, changed it to cost to cure 1500, the cost of the flooring. Now, the "vice Presidnet" of the secondary lendor is asking us to remove the cost to cure because they can't sell the loan... what is the best way to say NO without losing one of our best clients. n Because we know NO is the best answer...

 

[George Hatch]

I don't suppose that VP made that request in writing.... Well, no matter.

How to say no and not lose the client? It would seem you're looking at two conflicting goals.

On the one hand, a client who would ask you to alter a report in this manner so they can defraud their uplink in the wholesale market may not be such a good business risk when to comes to future business. I mean, this person obviously thinks their ability to sell this loan is more important to them than getting accurate and fair appraisal work, more important that them complying with the spirit and intent of safe and sound lending guidelines, and more important than their own borrower's long term interests. Besides, there are other options. They could fund-control the repair, then sell the loan after the condition is cleaned up.

On the other hand, well, there is no other hand.

However, if you want to give it a shot, you can always try running the "my hands are tied" gambit. You know, the one wherein the risks for failure to disclose puts your license in jeopardy, not to mention their client relationships and their own standing with the feds. I don't know what state you're from, but if your state appraisal board is active in enforcement actions they might (like California does) publish a summary of their enforcement actions. You can fax over a couple of these where the appraisers were disciplined, up to and including the suspension or revocation of their appraisal licenses, for misidentifying significant elements about the subject property. That might work. Tell them there is no such thing as a secret and your chances for getting caught are extremely high in a situation like this.

"Gee, I'd like to help you defraud your lender and take the entire responsibility on my head, but I know there's at least a couple copies of this appraisal report already floating around out there. The risk is simply too high. And while I'm sure that you would back me up if a complaint was ever made, I'm not sure enough that it'll fly to put my entire career on the line."

Sarcasm intended. Go for the sympathy card.

If that doesn't work, fire your client. Look at it this way: they're going to fire you sooner or later anyway. If not now, then when your outstanding (unfunded) invoices hit $1,500, whichever comes first.


George Hatch

 

[walt kirk]

As I understand it there are finished floors but they have sticky stuff on them and are to be covered by new flooring. Tell the VP thay you canl remove the cost to cure but since the valuation will be as-is you must reduce the estimate of value to reflect the sticky stuff.

 

[Francois K. Gregoire]

Barry and George,

Not quite sure if I followed the chain of events completely, but Barry might like to describe a recent case in Florida to his lender (can't tell if he's talking about the originating lender or secondary lender).

The complaint against the appraiser came about because of a post closing review ordered by the secondary lender. It was NOT Fannie Mae. Seems there were several flags raised in the deal to prompt their Quality Control folks to have a field review.

On the basis of information in the field review, the secondary lender required the originating lender to buy the loan back, citing violation of warrants and guarantees in their loan purchase agreement. Among those were warrants they were not aware of any discrepancies or misleading statements in the appraisal. Of course, the originating lender does not have the liquidity ($250,000) to buy the loan back. He's going out of business. The Secondary lender is taking him to the cleaners and as long as they have the time, the file a complaint with the Florida Real Estate Appraisal Board. The field review is made a part of the complaint.

The case has yet to be resolved, so I can't provide any more information. It should be enough to say it has been going on for two years.

Worth the trouble and the measly appraisal fee? You decide.

 

[Soar Ohio]

Charge them $1500 to change the report and have the floor fixed with the money.

 

[liznindy]

Great answer Tom ... you should be a diplomat!

 

[J in Florida]

I had a final inspection assignment for Wednesday for a closing Wednesday. The house was not finished, so I took pics of what was not done, and included verbage and photo addendum detailing what was not finished. When I called mortgage broker to tell IT that the house was not finished, I got the famous silence from ITS end followed by "but I have a CO" . I respond by saying, "the house is not done, if you're at your desk, I'll email you the pics you can see for yourself". IT says, "we're supposed to close, J, you need to take those statements and those pics out, the investor wont close with that in there. What are we going to do about this? My reply "for starters, the builder can finish the house". This is obviously the wrong answer. "I have the borrower right here, Dr. so and so, He wants to talk to you" hands the phone to borrower who goes off on me. When I inform DR whats his face that I was just axed to defraud his lender, Dr so and so understood immediately. Mortgage guy and Builder didn't seem to see it this way and will not shut up, I am not taking nor returning their calls.

This is the worst experience I have had with "you better or else" I have had, does anybody know of a good phone recording device? This piece of &*($ needs to go down.

 

[Larry Lyke]

Beating up the appraiser is part of the game.

Just stand your ground and try to remain civil.

There isn't anything they can do about it without your consent. Defrauding the investor is their game and they don't give a #### about you. Please understand this truth.

They're going to blame you for killing the deal anyways and they aren't going to give you any more business. What else do you want to lose in this process: your license, $1,000s in personal legal fees, prison, have your E&O dump you.

You're in the hardest place possible. The only thing to even consider doing now is standing still -- and doing what you know is right. Quit negotiating with them. Threat them back and let them deal your attorney.

None of the parties ever hear us say that our fiduciary responsibility is to the investor. The LOs are waiving their fiduciary responsibility. But it'll be the appraiser who goes to jail. Somehow the LO is never seen as a responsible party in an isolated court case.

 

[Jeff Horton]

Originally posted by J in Florida@May 2 2003, 09:47 PM
This is the worst experience I have had with "you better or else" I have had, does anybody know of a good phone recording device? This piece of &*($ needs to go down.

Call Soft answering machine software for you computer.

 

[Phil Rice]

I like the comment that says charge them $1,500 and use the money to fix the floor.

Lots of comments here that advise you to hold your ground. I am going to play devil's advocate. I do not see this as a black/white issue - I see grey.

A big part of the reason I see grey is the small amount of money -- $1,500. I round everything to the nearest $1,000 - I will never make a $500 adjustment. Perhaps your market is different? I would want to speak to the VP (directly or indirectly) and explain that you had agreed to show "cost to cure" before you completed the report. Now they are changing the agreement after the fact. You will try to help, but there is a limit to how far you can go, you are the one who will set the limit, and you do charge extra for the additional work involved. I would insist on getting paid in advance. If they will not agree, then I would assume that this is a client that is not going to work out in the long run, and protect my interest accordingly (don't get stuck with them owing you a lot of money).

You can disclose the condition of the floor in your comments (maybe include a photo to demonstrate that they look fine), and state that the dollar amount is estimated to be $1,500, and it is treated as included in overall condition. Move things around on the grid to make the appraised value come back to the same amount. If you have to go back to the property to take a photo of the floor, charge accordingly!

If I reviewed an appraisal, and my opinion of value was within $2K, I would say they got it right. Appraisers get in trouble when there are significant (more than $1.5K) problems with the appraised value and things are not disclosed, i.e., misleading. It is hard for me to imagine you being accused of fruad (etc) if you have valued the home properly and you have disclosed the issue with the floor. It is a $1,500 problem, keep things in proper perspective.

There is a possible problem with your client getting the idea that you are for sale, and they can "buy" the changes they "need". This is a delicate issue, but IMHO is possible in this situation to make everyone happy, including you, if you charge enough to make it worth your trouble.