Banks manipulating appraisals?
Just had a nice long conversation with an appraiser who is getting alot of REO and short sale appraisals. Out of frustration, I called him to seek understanding of a recent appraisal that we just got for an REO property. The property is worth 450,000 to 500,000 in repaired condition at best, assuming we used the highest priced sales in the neighborhood. The home is in very bad disrepair. We had 13 inches of rain the two days before the appraiser did his report and the house filled with water from a major roof leak. Enough water that your pant legs would be we up to 4" up. The home needs about 150,000 in repairs and updates minimum to make it worth 450,000 to 500,000 and then 450,000 might be a long shot.
The appraisal came in at $495,000 in as-is condition. No repairs were mentioned and the home was considered to be in average condition.
House has been on the market for 4 weeks, we had two offers come in, both at 250,000 and one countered at 275,500. Bank rejected because they were too far off from appraised price.
When I met with the appraiser, he was very excited to get these appraisal orders. He went on to tell me that the bank tells him which comps to use and what adjustments to make and that he rarely gets to do an appraisal based on the comps that he thinks are closest.
How would the bank benefit from overvaluing a property and letting it sit on the market? Insurance? MI? Anyone care to guess?
Replies to This Discussion
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Permalink Reply by Jill P on
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I think this appraiser should be reported to his governing organization. Include pictures in your complaint. Also Yelp and the BBB might be helpful, just to spread the word. Essentially, the client (bank) completely orchestrated this appraisal in a manner that produced the outcome they desired. The code of ethics speaks directly to this type of manipulation. That is ridiculous. If you or I, as realtors, attempted such a thing we would be immediately shot down, the whole purpose of an appraisal is objectivity regarding price. It's designed to be a system that keeps itself in checks and balances.
As others upthread have mentioned-- the banks get paid (70% I believe) for each and every missed payment from the FDIC. When the loss is actually on the balance sheet (the day they sell it), they can't cook the books any longer. They are crooks!
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Permalink Reply by A.W. on
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It's a world of UNETHICAL BUSINESS and a real shame that we can no longer use our licenses as they were intended. All this is run by a bunch of GREEDY ADMINSTRATORS. That's why the asset companies are now ramping up the change out of listing agents. Some of the BPO companies are dropping agents just because they won't lie and change out comps for them to meet their greedy appraisers report. LSI-LPS is one of them who does a lot of business for BOFA. They will make up a "real dummy issue" that would initiate a "red flag" on an agent to purposely get them audited and dropped from their system. Even if you can prove that what they said makes no sense or difference they still drop you. Anyway, if an agent is going to be involved in any unethical business games, then they deserve not to have any commissions. It all starts with us, the agents and appraisers that will make the MARKET VALUES what they are. We ourselves can be own worst enemies to the economy if we allow these banks to run our emotions. Yes, its tuff out there and the high rolling money does not come in as it use too but in reality, did any of us really deserve those high paying commission checks at one time when everything was over priced to begin with? Bottom line, we need to take back control so we can get this economy and market values where they really need to be. So again, ultimately it is up to the agent and appraisers how ethical and honest they want to be to their buyers/sellers. At the end of all the mess and in the case of a lawsuit, I guarantee you the banks will not stand behind you, so my advise is you better follow your better judgement.
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This Phenomenon seems to be happening quite a bit. We have a short sale that we priced to the comparables
down to the SF, condition, and location. This property was in a forested high
fire area, on well water and a septic system. The Banks appraisal came in 100k
above list price. The closest home at that value was newer, and 1000sf larger,
with many more amenities. Front line loan officers were doing this in the day of inflating values controled locally now the banks are doing it. Why would an appraiser do this? What would you do if
your employer, direct or indirect were holding your paycheck over your head?
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Banks are dictators and Realtors are negotiators so if you work for a bank in these roles your actions "for most" are they don't think independently. Its really robotic from my experience and frankly, NAR lobbied for years to keep banks out of Real Estate Industry but banks came through the back door and its taken the "wind out of the sells" in our industry because they don't operate with same standards Realtors are held to and frankly, never will so all integrity, morals or values are virtually non-existent. Banks hold the deck of cards and will continue to because they are allowed to and with a dictatorship mentality.
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Permalink Reply by Anita S Zahn on
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The appraiser needs to be turned into the appraisal institute. You will need to have as much info you can get to support this. This is what has contributed to the unreal market values. Shame on people who do this only to make the buck.
I have had this same problem with a GreenTree short sale. They have done a BPO which can in at $55K.
The appraiser could not tell me what his appraisal was for but did say that GT wanted him to use there comps and values and he refused. I told the appraiser that that GT wants $95K and he said his value was way less. I did my comps and they come in under $70K. The sellers ordered an appraisal last year because the same thing happened with another offer. That appraisal was at $72K.
The sellers are elderly have been battling with cancer, I feel so bad that the added stress from GT and Fannie Mae doesn't give them any hope for resolution.
The buyers are going to get a mortgage so they will have to get an appraisal. Even if they agreed to the counter offer of $95K the numbers will never come in. What are these lenders thinking when manipulating these numbers?
Has anyone out there overcome this issue with Fannie Mae?
GreenTree has been the worst lender I have ever had to deal with.
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Unfortunately, GreenTree Investments is another company that works with LSI-LPS doing the same unethical business for BOFA/LANDSAFE closing department. Always coming back to ask me to change out comparables. I would never do it because the comps they wanted me to use were never justifiable in my opinion. I guess they got tired of my honesty and good ethics, that they stopped sending me orders... LOL
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Permalink Reply by Jan Sanderlin on
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Before this new mess started in 2005, Banks were required by Federal Regulators to dump a non performing asset (Toxic) by or before 18 months. The time frame started at the time the NOD was filed. At the the time the NOD was filed, a matching amount had to be set aside into a reserve account. So, if the bank had a 500k loan that was a non-performing asset, the Bank now had 1m that was not earning interest and side lined. In 2007 the Feds came through and audited the non-performing assets and required the Banks to set aside yet another 500k for the same defaulted loan. Do any of you remember the great credit crunch at that time, where credit literally evaporated??? Then at the end of 2008 the great TARP fund bail out for the Banks, BUT, there were no requirements for the Banks in those agreements to help the home owner. Those Banks finished the year end with fat and happy balance sheets and I like to say the parasite rolled off the host fat and happy; and then all refused to participate in short sales or loan mods for about 6 months Then the great HVCC was enacted to supposedly oversee fraudulent appraisals. The Banks have wanted to control the appraisers and their income for a long time now and now own the companies that are connected to the HVCC. Our market has been manipulated from the beginning and continues to be manipulated now. Make the banks dump their REO inventories and if they fail, then let them fail and part out their pieces to the remaining ranks. There would be a brief glut of inventory, but this too would pass. I hear that foreclosures are up 11%, does this sound like a recovering market???? No, it sounds like a manipulated market...I certainly hope that you take the time to make complaints to the DOJ, OCC, USPAP, FDIC, and any other local agency that has oversight!
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Jan,
It sounds like we are on the same page, But Complaints go unheard without A LOT of Proof. With No Teeth were just a paper tiger Whinning. We have the data to STOP this Mess Do we want to organize to stop it Or Roll over write a complaint and hope to get a response. WE MUST TAKE GREATER ACTION TO BEAT THIS MONSTER!!
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Permalink Reply by cynthia holiday on
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I have not posted much in public as I have been working in the background with attorneys for a few years. I have been successful in gathering the information to many times get banks to bow using our laws, but it is time consuming and wrenching, and not very profitable.
I have a couple of ideas here.
If a borrower has a right to a copy of an appraisal for originations, would that also apply even theroretically to originating a mod or short sale as well since the appraisal is charged to the account?
Appraisal fraud is very serious and something the banks so far have not been able to side step so easily, like robosigning which if you guys haven't noticed is still happening pretty regularly.
To the attorneys out there:
Is it possible at the BPO appt. to hand the bank appraiser not only comps with a legal disclaimer ( not an attempt to influence the appraisal) And a copy of the appraisers USPAP code of ethics, or Realtor code, or DRE laws on fraud as a friendly reminder? Could we also pursue the borrowers right to a copy of the appraisal? And simultaneously file complaints for suspected Appraisal fraud? If anyone would like to work with me to explore this further and put together an appraisal fraud notice to the banks and complaint package please let me know.
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Permalink Reply by Joseph Kuhl on
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As an retired appraiser, I get to say this appraiser mentioned in this thread sounds like a jerk, and I question some of what he said.
First off, it sounds way too brazen - I mean unless this is some little sleazeball servicer, they know that they would get caught (eventually). The appraiser can't be that big a jerk that he doesn't know he is putting his license at risk by multiple violations of USPAP.
Second, the servicer provided the comps to be used? This also sounds suspicious. Where did the servicer get these comps - do they know all the areas where they have properties, and have a staff of some sort to pull up listings and sales and go through them to see if they are useable at all? I still do a fair number of more difficult BPO valuations (mostly commercial) for those institutions who are willing to pay my exorbitant fees ($250min for SF, $400 for commercial) and I have dealt with some pressure for higher values; but usually it's a list of sales pulled from MLS/tax records with an request to explain why none of them were used. But I have never been told to use a bad comp. I have been dropped by one or two AMCs because I charge extra for the additional work they are requesting (hey it takes time to look up all these bullshit comps and say why they are no good), but have never been told 'or else',
Of course, I got out of the appraisal biz before 2007, and I know things have changed (for the worse, mostly) for appraisers since, so I suppose this sort of overt and illegal manipulation of value could be more common.
I would never question the mendacity or potential incompetence of servicers and investors, so this is not a defense of them in the least. And brokers and appraisers are certainly put in a difficult position when they are pressured for a certain result with the threat of being cut off from further work.
Jeff - not clear if this property was your listing or not, but I would try to get a copy of the appraisal (not easy I know). Whether or not that happens, I'd document all the repairs needed with photographs and send that to the servicer with letter giving a cost to cure for the documented items and ask if this was considered in the appraisal. (Also fax it, this seems to get more attention, and you can send it certified mail, if you want proof it was sent and to ruffle feathers a bit more). Also, say MOLD a lot - this tends to freak them out a bit, because of potential health/lawsuit consequences. Technically this is then a 'safety' issue that requires immediate remediation by a certified contractor. I seriously doubt the the appraiser was an FHA appraiser, and mostly likely sale of a house in this condition with be via FHA 203K (or cash), so all these repairs will rear their ugly heads a little further down the road.
If you have a well certified appraiser you like in your area, you can also see if he'd be willing to do a Form 132 or like - these are SF Field Review of an existing appraisal, and there is plenty of room to slam a POS appraisal. Problem is - appraisers don't like to eat their own kind, and you need to legally obtain the original appraisal. It can also be done more informally.
As for the appraiser, somebody needs to slap him upside the head. Barring that, your call as to whether or not you want to report him (both to state licensing authority and to whatever national organization he belongs to). It's not that hard to do - the question is ... do you want to make trouble and ... maybe lose business. Which puts you no in the same position as the appraiser himself.
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Yes they are- they are also holding on to the inventory, to reap the benefit of appreciation and increased sales prices. Banks are not STUPID.
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