A New Spin on Short Sale Fraud

This is a couple of weeks old, but is certainly timely. The podcast is about 18 minutes long, but you can listen while you search the interwebs for the perfect comparable sales.

Courtesy of the National Association of REALTORS.

Freddie Mac Investigator Robert Hagberg in a podcast from NAR Legal Affairs discusses some of the recent short-sale payoff fraud schemes, such as "flopping," that he’s seeing. He also discusses the various ways—good and bad—that real estate professionals are involved.


HERE is the LINK.

Florida Legislature - Major Fail

Appraiser Active has already posted about CS/HB 5007. The bill is making its way through the legislative committee process. The bill, originally with the title, "Reducing and Streamlining Regulations" includes amendments to statutes regulating several professions. Among them are real estate brokers and real estate appraisers. Two sections related to real estate with the potential to weaken consumer protection.

In addition, the legislature appears to be making an attempt to solve a problem related to how the Uniform Standards of Professional Appraisal Practice is interpreted by some Administrative Law Judges as a result of a Florida Appellate Court ruling. See pages13 and 14 of the Staff Analysis for the explanation.

Below is the language proposed. Other specific references to the Uniform Standards of Professional Appraisal Practice in Chapter 475 Part I and Part II are removed. I'm not sure if the amendments will do what is intended because the section below, from page 19 of the bill, is a major FAIL.

Section 19. Section 475.628, Florida Statutes, is amended to read:


475.628 Professional standards for appraisers registered, licensed, or certified under this part. The board shall adopt rules establishing standards of professional practice that meet or exceed nationally recognized standards of appraisal practice, including those standards adopted by the Appraiser Qualifications Board of the Appraisal Foundation. Each appraiser registered, licensed, or certified under this part must shall comply with the rules Uniform Standards of Professional Appraisal Practice. Statements on appraisal standards which may be issued for the purpose of clarification, interpretation, explanation, or elaboration through the Appraisal Foundation shall also be binding on any appraiser registered, licensed, or certified under this part.

 Please join me, and let your representatives know that the Appraiser Qualifications Board of the Appraisal Foundation does NOT adopt standards of appraisal practice. That would be the Appraisal Standards Board of the Appraisal Foundation.
 
I'm anxious to see what the Appraisal Subcommittee has to say about the proposed language.
 
 

Florida Legislature: Weaken Consumer Protection, Delay AMC Regulation

As if there are not enough negative vibes surrounding the appraisal profession, the Florida Legislature seems to be hell bent on weakening consumer protections in Florida's real estate and appraiser licensing laws, and delaying implementation of Appraisal Management Company registration and regulation.

CS/HB 5007 is making its way through the legislative committee process. The bill, originally with the title, "Reducing and Streamlining Regulations" includes amendments to statutes regulating several professions. Among them are real estate brokers and real estate appraisers. Although some new, necessary language was added to the Committee Substitute bill, there are two sections related to real estate with the potential to weaken consumer protection.

Section 21 of the bill effectively eliminates criminal penalties for certain violations or Chapter 475, Part I, and Sections 22 eliminates criminal penalties for certain violations of Chapter 475, Part II. The logic(?) is spelled out in pages 8 and 9 of the Staff Analysis.

After spending 8 years as an appraisal regulator, the explanation does not wash with me.

The second problem with the bill is the DELAY in the implementation of AMC Registration and Regulation until July 1, 2014. Take a look at the logic(?) presented on page 12 of the Staff Analysis.

This delay is unwise, unnecessary and foolish. Consumers, real estate brokers, real estate appraisers have been paying the price for the lack of AMC regulation. All the reasons for AMC regulation are still valid. Why does the legislature believe folks like THIS deserve to continue operating AMCs in Florida?

Alert the media, and let your representatives know that delay of AMC registration and regulation will hurt consumers.

Harold Huggins Realty, et al v. FNC, Inc. - Going to Trial - UPDATED

Scroll for UPDATE

Although Appraiser Active has not posted about this, we have been following the case for a while. A quick synopsis is provided on the Valuation Review blog.

In Harold H. Huggins Realt, Inc., P.E. Turner & Company, LTD., Residential Appraisal and Consulting, Inc. and Alfonoso V. Torres doing business as Front Door Appraisals vs. FNC, Inc., a trio of appraisers filed a federal class action lawsuit against the technology firm seeking damages for negligent misrepresentation, misappropriation, breach of implied contract and other charges.

A copy of the complaint against FNC, Inc. and their AppraisalPort service was posted over on WorkingRE way back when.

As with any complex litigation, particularly a class action suit, the clock and calendar have gone around several times while parties make and argue motions, and the defendant seeks to have the action dismissed. The latest action was the plaintiff's appeal of the district court’s order granting the defendant's (FNC, Inc.)  motion to dismiss the case under Federal rule of Civil Procedure 12 (b)(6). (NOTE: I will not even pretend to know what that means.)

An audio of the oral argument before the United States Court of Appeals for the Fifth Circuit (New Orleans, Louisina) is available at this LINK. It takes a while to listen to the entire proceeding, but it's WORTH IT!

Yesterday, the Court of Appeals rendered their decision in favor of the plaintiffs. The Appeals Court reversed the decision to dismiss and remanded the case back for further proceedings.

Here is the Court of Appeals' decision:
FNC Case - Opinion 24Feb2011

UPDATE - March 30, 2011

The Letter of the Law page on Realtor.org has been updated with a synopsis of the case and an informative explanation of the decision.

A federal appellate court has considered whether to reinstate a possible class action lawsuit against a vendor that had allegedly promised its appraiser clients that information submitted through its system would be confidential but the vendor actually collected the information and offered it for resale.

Four real estate appraisal firms (collectively, “Appraisers”) brought a lawsuit against FNC, Inc. (“Company”). The lawsuit sought class action status for other similarly-situated appraisers and alleged that the Company had violated the Lanham Act (“Act”) by informing the Appraisers that their appraisals submitted through the Company’s AppraisalPort would be confidential when the Company was actually repackaging the data for resale.

Here is a link to the full article.

Pick a Number - Take #2

On Valentine's Day, KCBS out of San Francisco, aired a story about homeowners with low appraisals, and how they are "fighting back". It's not a new story, nor is it a new argument. Appraiser Active has posted on the topic several times since the HVCC took hold back in 2009. HERE, HERE, and HERE. Folks in the brokerage community have documented plenty of sad tales and a number of stories have been written in newspapers and magazines.




Some of the claims appear to have merit; others are outrageous. The video at the link above  is included because we take issue with a couple of statements made by the "experts".

“An appraisal is just an opinion,” said Tara-Nicholle Nelson, consumer educator at Trulia.com.

Sorry, Ms. Nelson, but I must disagree. An appraisal may be stated as "an opinion" but the opinion is stated in the appraisal report after research and analysis of relevant evidence, application of reason and logic, and development of the necessary approaches to value. An appraisal must be developed and reported in accordance with applicable standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP), and standards and guidelines required by client groups, government agencies, and individual clients.

Ms. Nelson also claims that “Appraisers are under regulation and under pressure to be much more conservative because they took so much pressure for inflating values at the top of the market,”

Appraiser Active has heard plenty of claims from appraisers about pressure from clients and some AMCs to be conservative, but must have missed the regulation that requires "conservative" opinions of value.

A real estate broker in the video makes the claim that 1 out of 7 deals is killed because of the appraisal. That may be her experience, but she goes on to whine about the buyer's reaction "when an appraisal doesn't come in at value".

Here's a clue for you, my dear: The negotiated sales price is not necessarily the value of the property. It may be an indication, and should certainly be considered in the development of the appraisal, but it's only one small bit of the mountain of data that will be collected, verified and analysed.


Take a look at their story, HERE, and make sure to read the comments.

Just had to get that off my chest.

How About an NAR Update!

The National Association of REALTORS® met in New Orleans November 3 - 7, 2010 for their Annual Conference and Expo. As an active participant in the NAR Family, the Appraisal Committee met November 5th.

The agenda included reports from the NAR representative to The Appraisal Foundation Advisory Committee, Vic Knight, and an update about The Appraisal Foundation from the NAR representative to Board of Trustees. H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act was discussed, along with our participation in the rules-making process. The committee was briefed on the activity of the NAR HVCC Work Group, and the progress of the Realtor's Property Resource (RPR).

The Appraisal Committee learned that Joe Traynor, GAA, a past Chair of the Committee, has been selected as Chairman of The Appraisal Foundation Board of Trustees for 2011. Another past Chair of the Committee, Vic Knight, has been named as the NAR representative to the Board of Trustees. The Chair of The Appraisal Foundation's Appraiser Qualifications Board (AQB) is another past Chair of the NAR Appraisal Committee, Rick Baumgardner. Since one of the 2011 goals is to maintain NAR representation within The Appraisal Foundation, it's nice to see an early fulfillment of that aspiration. All three are good friends, and tolerate my kidding them about going over to the Dark Side.

In addition to the above accomplishments, the Committee discussed the upcoming meeting of the NAR Professional Standards Committee. Back in August, 2010, the Appraisal Committee submitted a letter to the Professional Standard Committee with several suggestions for amendments to the NAR Code of Ethics and Standards of Practice. The recommendations were considered by the Interpretations and Procedures Subcommittee, and their report would be considered by the full committee. Later, it would be considered by the NAR Executive Committee and Board of Directors.

Although not all of the Appraisal Committee recommendations were accepted, two important ones were, and approved by the Board of Directors.

Standard of Practice 3-7 was amended to recognize that appraisers do not typically "represent" a client. Realtor Appraisers, when seeking information about listed property, now must merely disclose the "relationship" with their client to the listing Realtor. Representation of the client is no longer required.

That's nice, but the Board of Directors also approved an amendment to Article 15, and Standard of Practice 15-3. An amendment to an Article of the Code of Ethics must be approved by the NAR Delegate Body. The Delegate Body will consider this amendment in Anaheim, California during their meeting on November 14, 2011. If approved, Article 15 will read:

REALTORS® shall not knowingly or recklessly make false or misleading statements about other real estate professionals, their businesses, or their business practices.

The amendment to Standard of Practice 15-3 will be effective if the change to Article 15 is adopted by the Delegate Body. It will read:

The obligation to refrain from making false of misleading statements about other real estate professionals, their businesses, and their business practices includes the duty to publish a clarification about or to remove statements made by others on electronic media the REALTOR® controls once the REALTOR® knows the statement is false or misleading.

Since many Realtor Appraisers have expressed their concern about the Quadrennial Ethics Training Course, we're in the process assembling a group of folks to make some recommendations for course content. It's unlikely that fulfilling this education requirement will ever be a favorite for appraisers, but we aim to make the content more appropriate for our niche of the real estate profession.

Well, that's part of what the Appraisal Committee has been up to. There's more and more updates to come. There are a few appraisals on my desk to complete.

“That NAR’s Appraisal Committee be asked to provide content applicable to appraisal practice and NAR’s Code of Ethics, and that such content be developed as a separate course or an optional component of the existing Quadrennial Ethics Training Course.”

Rationale: A separate ethics course, or course component, with content applicable to appraisal practice would make the Quadrennial Ethics Training requirement more meaningful to the appraisal practitioners as they satisfy their ethical duties of REALTOR® membership.

There was one additional recommendation considered by the Professional Standards Committee: Currently, the term "competitors" is used in place of "other real estate professionals".

New Year Surprise

Right around Thanksgiving, my trusty desktop computer fried a motherboard. After cleaning up a few viruses, my tech installed the old hard drive in a new used machine. After half a day spent installing all my software, I was up and running. No data was lost and I was able to recover about 5 years worth of emails and correspondence. That lasted about 10 days.

The new used machine slowed dramatically and then refused to boot. Another trip to the computer shop. My tech found a nasty virus; one he was sure that hid itself in my old hard drive. After carefully scanning all my data from the old hard drive, it was transferred to a new, larger drive along with different virus protection. Another half day was spent reinstalling all my software and a new external hard drive for backup. At this point, all my data and correspondence is still intact. Whew!

Everything was fine until 1/11/11. I'm sure you all have experienced the "joy" of having your home page changed, your search engine hijacked and rogue software installing itself on your machine. It's not pleasant, and does not contribute to productivity. Even worse, the cure for this attack cost me in the form of lost data. For some reason, my backup included only my archive of emails. As a result, I've lost the most recent 12 months of emails. That is the reason for this post. I'm not looking for pity.

Plenty of readers have emailed over the years with questions about items posted here on Appraiser Active. We've done our best to correspond help out when possible, and check back to see how things are going. With the loss of those emails, I'm in the dark.

If you have emailed me with a question, concern, or suggestion, I would appreciate hearing from you again. If I have not responded to something sent my way in the last month, it's most likely because the email has been lost. Please send it one more time.

francois @ tampabay.rr.com (just remove the spaces)

With a healthy computer I hope to catch up on work and post some REAL news soon.

All the Best for 2011

Fortunately, for me, 2010 is ending with a flurry of activity. Folks are calling in with requests for valuations for estate purposes, and several lawyers have inquired about engaging me for expert witness assignments. Unfortunately, that has kept me from posting here on Appraiser Active. My resolution for 2011 is to post more regularly, and to follow up on promises of information.

HAPPY NEW YEAR!

Merry Christmas

Appraiser Active wishes you a Merry Christmas. We hope you have a chance to visit St. Petersburg some winter. It's expected to be about 70 degrees later today, although the temperature is only 51 at 9:45 A.M.

Pick a Number, any Number - Who to Blame?

This story is getting huge distribution, but the spin offered by bloggers and commenters on news sites really varies.

Special Report: What's a home worth? Pick a number, any number

 WASHINGTON (Reuters) – Aaron and Beth Stiner are renters, but not by choice and not because they can't afford to buy a house. They had a move-up home in Phoenix selected and good credit scores. They even had buyers lined up for the home they were selling. Then they entered appraisal hell.

 
The first appraisal on their chosen home came in at $295,000, a figure that both the Stiners and the sellers agreed upon. The lender didn't like it, and ordered up a second appraisal. Based on comparable homes that were in a different neighborhood, the new appraisal came in $25,000 lower -- too low to allow the loan to go through.
 
They switched lenders and got another appraisal that, at $290,000, would have allowed the deal to go through. Their new lender was skeptical, and ordered up another appraisal. At the same time, the home they were selling was appraised three times, with each subsequent valuation falling.
 
Four months later, the Stiners and their buyer both gave up. Together, they were out $1,600 for seven appraisals. "As a result, we are now renting our home out, and renting the home we wanted to buy," says Beth. "We were frustrated and we weren't going to keep doling out cash for new appraisals. It felt like a game."

Read the full story HERE.

During the build up to the boom time and housing bubble, the loan originiators and lenders were pushing and shopping for the highest number from the appraiser. It's now come full circle; if the lender doesn't like the number the first appraiser delivers, they start shopping for a lower number.

Interference with the objectivity of the appraisal process is not acceptable, no matter the direction folks are pushing the appraiser. Although it has been, and continues to be fashionable to blame the appraiser, take a close look at the story. It's the lender shopping for a "value" to their liking. By what "standard" are the appraisals being evaluated?