Taking Care of (Your) Business
by David Brauner, Editor

Two files sitting on my desk speak to why your success depends on knowing who you work for and who you are working with.

One file concerns an appraiser dragged into a claim against a sub prime lender accused of predatory practices; the second demonstrates why providing a comp-check value conclusion is bad business as well as bad appraising. You’ll find details below.

As you unwind into summer, Working RE offers for your review and reflection three other recently published stories: "Identity Theft - Appraiser Style," "Cautionary Tale! Keeping Track of Work Files," and "Comp Checks: Turning Requests into Orders." You’ll find them posted at www.workingre.com. These and other stories in our library will help you take care of your business. (Full access may require a paid subscription to WRE or membership in OREP.)  

“Identify Theft” finds an appraiser in trouble because of the company he keeps; a trainee who does it all for his mentor, including writing “ghost” reports that the mentor never sees, let alone reviews.

In “Work Files,” missing files from the distant past become an issue for one appraiser when the firm he worked for comes under scrutiny by authorities. By now, the files and the firm have vanished, leaving this appraiser with a problem. (story continued below)  

As an insurance provider, OREP sees an increasing number of appraisers dragged into lawsuits where fraud is the primary issue, rather than an error or omission. If that doesn’t surprise you, think what that says about the times we live in!

In the case discussed here, misrepresentation regarding interest rates and other terms of the loan is alleged, as well as forged documents and other pleasantries. The court documents allege that (false) promises were made “to mislead and deceive (the borrower), to have (the borrower) agree to the loan and for the (loan officer) to obtain the immediate profits and fees generated by the loan.” You get the (ugly) picture.

According to the suit, these fraudulent acts resulted in the homeowner having negative equity in the home, becoming financially insolvent and filing for bankruptcy.

It also is alleged that the appraisal was inflated by over 30 percent. While it is too early to know, we have seen appraisers in similar circumstances eventually cleared and dropped from their suit (many sleepless nights later). For them, legal problems occurred not because of an error evaluating a property but rather due to an error in judgment about a client.

Of course, we also have read reports of appraisers and lenders being convicted of fraud and sent to jail. In these cases, no one sheds any tears. 

Nature of Comp Checks
When it comes to comp checks, many appraisers walk the line between customer service and a USPAP violation. Some leave the comp check option open to service their best clients- within the rules of course; some just say no to anything other than an order.

The second file on my desk comes from a Working RE reader and documents the now familiar dance: a loan officer asks an appraiser to okay a value before proceeding with the appraisal. The appraiser does a quick “comp check” and derives an unsupported value that, in this case, is not enough to make the deal work. True to script, the loan officer moves on to the next appraiser on the list in search of compliance.

The next appraiser on that list happens to be the reader who submitted the documents we now discuss. He had a very different answer for the lender in question. 

“The lender told me: ‘Please note that you are required to notify us with any valuation issues prior to the submission of this report.’ I told him that I cannot abide by that rule. I told him that I will complete the assignment and deliver it in written form. And that unlike the first appraiser, I do not do desktop appraisals (comp checks) for free. The lender told me to hold off.”