fraud
325) Illegal Uses
05/23/08
Good morning Henry,
I am being assigned an appraisal for a multi-family for Private Mortgage Insurance (PMI ). The lender requests an "as is " appraisal. In my initial research, the subject is listed on public records as a 2 family dwelling.
In contacting the owner to set up my appointment, I am told it is a 3 family dwelling. Checking the prior MLS listing when subject was purchased
it is noted as a 2 family style with "finished apartment on third floor." This is typical for the area, but not legal. I will check with the building department when I go to do the inspection to see if there is a permit that changed its use to a 3 family. If not, do I appraise the subject as a 2 family with an accesory apartment and note that the 3rd unit is not a legal use, or do I appraise as a 3 family unit, as it is being used, but note legality issue of third unit.
Thank you
Joe Violetta joseph_a_violetta@sbcglobal.net
Dear Joe,
This is a very tricky problem. These residences with ancillary third floor dwelling units are very common, especially in cities near universities, such as New Haven where I live. Step one is to ask the client what they want you to do. If they say to appraise it as a three family, then I would describe it as such. However, you must report in the appraisal the investigation you made just as in your question. Keep in mind that your highest and best use analysis (which is required) must be for a legal use. However, for your value estimate, you can consider the present use, but you will need to include an opinion as to how long you think that use will be permitted and how the market reacts to houses like this. The best comparable sales are other 2 family houses with an illegal third family dwelling unit as well.
H2
I am being assigned an appraisal for a multi-family for Private Mortgage Insurance (PMI ). The lender requests an "as is " appraisal. In my initial research, the subject is listed on public records as a 2 family dwelling.
In contacting the owner to set up my appointment, I am told it is a 3 family dwelling. Checking the prior MLS listing when subject was purchased
it is noted as a 2 family style with "finished apartment on third floor." This is typical for the area, but not legal. I will check with the building department when I go to do the inspection to see if there is a permit that changed its use to a 3 family. If not, do I appraise the subject as a 2 family with an accesory apartment and note that the 3rd unit is not a legal use, or do I appraise as a 3 family unit, as it is being used, but note legality issue of third unit.
Thank you
Joe Violetta joseph_a_violetta@sbcglobal.net
Dear Joe,
This is a very tricky problem. These residences with ancillary third floor dwelling units are very common, especially in cities near universities, such as New Haven where I live. Step one is to ask the client what they want you to do. If they say to appraise it as a three family, then I would describe it as such. However, you must report in the appraisal the investigation you made just as in your question. Keep in mind that your highest and best use analysis (which is required) must be for a legal use. However, for your value estimate, you can consider the present use, but you will need to include an opinion as to how long you think that use will be permitted and how the market reacts to houses like this. The best comparable sales are other 2 family houses with an illegal third family dwelling unit as well.
H2
316) Fraudulent Appraisal
05/12/08
Dear Henry:
I ran into an interesting situation on a current appraisal order. The property (8.24 acres) has two units on it. One is the subject to be appraised. The other is a finsihed (but vacant) apartment above a barn, with seperate utilities meters. The zoning is single-family residential (2 acres minimum). The client wants me to not mention the second vacant structure. The bank he is dealing with wants it on a Form 1025 (but the zoning will not allow that). My own thought is to treat it as two single-family structures, but then how do I handle the property?
Help!
Larry KowittL@aol.com
Dear Larry,
The USPAP prohibits you from making an appraisal that you think may be used to mislead someone. That is what this sounds like to me.
H2
I ran into an interesting situation on a current appraisal order. The property (8.24 acres) has two units on it. One is the subject to be appraised. The other is a finsihed (but vacant) apartment above a barn, with seperate utilities meters. The zoning is single-family residential (2 acres minimum). The client wants me to not mention the second vacant structure. The bank he is dealing with wants it on a Form 1025 (but the zoning will not allow that). My own thought is to treat it as two single-family structures, but then how do I handle the property?
Help!
Larry KowittL@aol.com
Dear Larry,
The USPAP prohibits you from making an appraisal that you think may be used to mislead someone. That is what this sounds like to me.
H2
274) Fraud Reporting
03/18/08
Dear Sir:
I realise that you are very busy and have a life aside from answering emailed questions, but I would greatly appreciate your opinion on this matter.
I have written previously with regards to fraudulant Real Estate transactions involving inflated appraisals, FHA, seller funded "gifts", and cash backs. The appraiser I have documented, along with an inspector and loan originator, are not FHA licensed. The persons involved include Realtors, buyers, title companies, local government officials and the lending institution. Sellers and FHA are being ripped off over and over by this same group of "investors" who flip the properties back and forth at ever greater amounts. Not a single regulatory or enforcement agancy will accept my report of this fraud. Can you please offer any advice?
Thank you!
Name withheld by request
Dear Friend,
I suggest that you try the Attorney General of your state.
H2
I realise that you are very busy and have a life aside from answering emailed questions, but I would greatly appreciate your opinion on this matter.
I have written previously with regards to fraudulant Real Estate transactions involving inflated appraisals, FHA, seller funded "gifts", and cash backs. The appraiser I have documented, along with an inspector and loan originator, are not FHA licensed. The persons involved include Realtors, buyers, title companies, local government officials and the lending institution. Sellers and FHA are being ripped off over and over by this same group of "investors" who flip the properties back and forth at ever greater amounts. Not a single regulatory or enforcement agancy will accept my report of this fraud. Can you please offer any advice?
Thank you!
Name withheld by request
Dear Friend,
I suggest that you try the Attorney General of your state.
H2
135) Fraudulent Appraisal
10/25/07
Dear Henry,
I recently submitted an appraisal to the MREAC that I had reviewed so that they might put the appraiser out of business.
The appraiser had increased the sales prices of ALL 3 MLS comps by $20,000 each. Subject property was appraised @ $73,000. The MREAC "voted to take no further action" against the appraiser.
I now have a new mission in life but need some guidance. What would you do at this point to right this wrong?
Respectfully,
John L. King, SRA john@kingappraisalgroup.com
Dear John,
Most courts do not like to overturn the ruling of an administrative body unless it was unreasonable.
If you think this was done to defraud a lender, you can go to the FBI or the Banking Commission and ask that they investigate further.
Unless you were personally injured by this appraisal, I would walk away. There are only so many battles one can fight, and perhaps this is not one you want to spend a lot of time and energy on.
H2
I recently submitted an appraisal to the MREAC that I had reviewed so that they might put the appraiser out of business.
The appraiser had increased the sales prices of ALL 3 MLS comps by $20,000 each. Subject property was appraised @ $73,000. The MREAC "voted to take no further action" against the appraiser.
I now have a new mission in life but need some guidance. What would you do at this point to right this wrong?
Respectfully,
John L. King, SRA john@kingappraisalgroup.com
Dear John,
Most courts do not like to overturn the ruling of an administrative body unless it was unreasonable.
If you think this was done to defraud a lender, you can go to the FBI or the Banking Commission and ask that they investigate further.
Unless you were personally injured by this appraisal, I would walk away. There are only so many battles one can fight, and perhaps this is not one you want to spend a lot of time and energy on.
H2
84) "As Is" Appraisal Ethics
05/03/07
Dear H2,
I live in Louisiana and have been contacted by our state's "Road Home Program" to appraise hurricane damaged homes in New Orleans and surrounding areas. The fee offerred for the required 2055 form is less than half of what I would normally charge for a similar appraisal.
When I voiced this concern I was told most appraisers are completing 10-12 appraisals a day on the 2055 form. I work fast, but I can't imagine completing so many appraisals in one day. Most if not all of these homes will have water or storm damage.
My question is what type of liability would an appraiser have for doing this type of "boilerplate work" with so much guess work involved? And, is there a USPAP departure which would cover me for not reporting damage and still appraising the property "as is"?
Clint Land crland@sport.rr.com
Dear Clint,
If you appraise a property "as is" and fail to report any damage that exists, it will just be a matter of time before you lose your license or certification. Professional liability insurance does not cover a professional for FRAUD.
H2
I live in Louisiana and have been contacted by our state's "Road Home Program" to appraise hurricane damaged homes in New Orleans and surrounding areas. The fee offerred for the required 2055 form is less than half of what I would normally charge for a similar appraisal.
When I voiced this concern I was told most appraisers are completing 10-12 appraisals a day on the 2055 form. I work fast, but I can't imagine completing so many appraisals in one day. Most if not all of these homes will have water or storm damage.
My question is what type of liability would an appraiser have for doing this type of "boilerplate work" with so much guess work involved? And, is there a USPAP departure which would cover me for not reporting damage and still appraising the property "as is"?
Clint Land crland@sport.rr.com
Dear Clint,
If you appraise a property "as is" and fail to report any damage that exists, it will just be a matter of time before you lose your license or certification. Professional liability insurance does not cover a professional for FRAUD.
H2
74) Fraudulent Appraisals Prohibited
04/04/07
Dear Henry,
I have been asked to appraise several builders' spec home properties in Florida at current market value for an investment group. As I understand it so far, the contracts will then be based upon the appraised market value of the properties with a ‘marketing fee’ of around 30% of appraised market value being taken out on the HUD and paid to (I think) the investment group.
Are there any concerns or any questions that I should be addressing?
Randy E Deeter www.htaappraisers.com
Dear Randy,
From what little you tell me, it sounds like you need to be concerned. USPAP prohibits you from knowingly making an appraisal that might be used in a fraudulent transaction.
This prohibition appears in the 2006 USPAP, under CONDUCT:
"An appraiser must not communicate assignment results in a misleading or fraudulent manner. An appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report."
H2
I have been asked to appraise several builders' spec home properties in Florida at current market value for an investment group. As I understand it so far, the contracts will then be based upon the appraised market value of the properties with a ‘marketing fee’ of around 30% of appraised market value being taken out on the HUD and paid to (I think) the investment group.
Are there any concerns or any questions that I should be addressing?
Randy E Deeter www.htaappraisers.com
Dear Randy,
From what little you tell me, it sounds like you need to be concerned. USPAP prohibits you from knowingly making an appraisal that might be used in a fraudulent transaction.
This prohibition appears in the 2006 USPAP, under CONDUCT:
"An appraiser must not communicate assignment results in a misleading or fraudulent manner. An appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report."
H2