Posted by Mike on April 11, 2004 at 09:50:53:
Yea, you’re right. It’s a shame. Thank you for your help!
Has anyone ever heard of this one? - Posted by Mike
Posted by Mike on April 10, 2004 at 18:52:04:
I just bought a handyman special for approx. $120,000 less than market value. It needed approx. $45,000 worth of work. My intention was to fix it up and refinance it. Before I bought the house I ran local comps. The 2 houses next door sold 3 months ago. One sold for $340,000, the other $360,000.
I just completed the renovation and had an appraiser come in. He mentioned he cannot use the comps of the two houses right next door because they were bought by a Real Estate, rehabed then sold. He told me the only comps he can use were buyers to sellers. Real Estate’s that own houses and fix them to sell them ‘practice illegal financing’. He said that these type of ‘flips’ are usually done on “shady terms” and the comps are not allowed to be used.
Is this guy for real? If a house is sold from person A to person B, who cares who sold it. How does this make the sale ineligable for comparisons?
Can anyone help? If so, with some legal definitions or reference?
Thank you
Re: Has anyone ever heard of this one? - Posted by Qinvestor
Posted by Qinvestor on April 11, 2004 at 10:23:42:
Something a little similar happened to me in Tampa over by the Busch Gardens area. I was rehabbing a 4/2 corner lot. When it came time to do the appraisal they said they were having a hard time because there weren’t many 4/2’s in the area. Also when it came time for my buyer to obtain financing - her mortgage broker was not experienced with the “seasoning” issue. They were first going for a FHA loan, which I found out the HARD way a pain in the butt for buyer to get qualified for due to the time I held title to the property. I was better off doing the X down and X a month owner financing and just sell the loan in the back end. Anyway the FHA wanted an Appraisal review complete with ALL receipts & another appraisal after all was said and done they went conventional and didn’t go FHA. I don’t know what happened there! But it sure wasted ALLOT of time- it took 2 months of rehabbing and 3 months to lock it up. Plus the realtor that handled the sale didn’t know what “seasoning” is or atleast she seemed like it. I learned allot off of this one sour deal - this was when I was getting into the business a while ago.
Q
Re: Has anyone ever heard of this one? - Posted by jasonrei
Posted by jasonrei on April 11, 2004 at 09:03:43:
He may have dismissed those sales because he felt the sales were really scams. If they were scam sales, I don’t blame him for passing.
I bought a house last year and did my own comps, like always. I won’t go into the numbers, but it looked like I was getting a HOMERUN deal. Mind you, I get OK deals all the time. Anyway, I bought and rehabbed. Put the thing up for sale, and then it hits me. I start putting things together in my mind. These high sales I was looking at, some of them went into foreclosure, and some were by the same agent. I realized I had bought using scam numbers. The actual value of my house (the value it should have gotten if there was no fraud involved) was about $40k less than the number I had in mind.
A scam sale sometimes goes like this. Investor A buys a house for $150k cash, needs pretty minor work, or needs major work but the expensive stuff can be covered up easily. Slaps it together for $20k. Usually the house is in an area where there are very nice expensive homes within a mile or so. An appraiser finds homes in a nicer area that are similar in size. Say the average of the homes he/she picks is $300k. Investor A goes to his mortgage broker (who is in on the scam). They find a guy on the street (maybe a bum) that doesn’t mind having his name and credit run through the mud for $5000 cash. They forge some bank statements, tax returns, etc. Maybe they even make up credit reports. Loan gets approved and sale goes through. At closing Investor A gets $300k. Gets back the $180k+ he has in the property, plus lets say $10k for the bum and some holding costs. That’s $110k profit. The investor, appraiser, and mortgage broker divide that up somehow. A lot of times they’ll try to do dozens of these deals in a short period of time. The bum never makes a payment, so the house gets foreclosed on. The lender is left with a $300k loan on a house worth about $150-$180k. Think of how many GOOD loans you have to make to cancel out a $150k loss!
Anyway, maybe your appraiser recognized such a scam.
Yes, new appraisal guideline - Posted by MoniqueUSA
Posted by MoniqueUSA on April 11, 2004 at 08:57:09:
We had an appraiser explain that their new guidelines are to not use sales as comps where the seller owned the home for less than 36 months. It was either a new FNMA or a new FHA guideline … can’t recall which one.
It looks like your appraiser is applying the new rule, but is giving you the wrong reason.
MoniqueUSA
Get a new appraiser (NT) - Posted by Craig ILI
Posted by Craig ILI on April 11, 2004 at 07:19:33:
>>>>>>>>>>>>>>
Re: Has anyone ever heard of this one? - Posted by Frank Chin
Posted by Frank Chin on April 11, 2004 at 06:16:23:
Mike:
While ones next store should give the best comps, couldn’t the appraiser use ones down the street, within a few blocks etc?? If those in the immediate vicinity appraise for the same value, you should be OK.
I sometimes hear that “so and so” grossly overpaid for a house because they like the size of the back yard, the layout of the kitchen etc. And I always wondered when that happens, does it automatically RAISE the comps in the area??
As to your question “has anyone heard of this one”, I read of several recent flipping scams in the NY/NJ area where one scammer would buy a home or two at market, flip it to a partner in the scam at above market to establish a NEW HIGHER comp. They then buy others in the area using the first one or two as a comp. Afterwards, they claim rehabs were done whereas they only did minor cleanup and painting.
One bunch of scammers did hundreds of flips, and it came to light only after buyers defaulted, mainly because they spent money fixing the houses, and can’t pay the mortgage. Another aspect was false information submitted on the mortgage applications.
Thinking about it, if the buyers never defaulted, the scammers would’ve gotten away with in.
I ran into the reverse side of the problem. I bought REO’s in the early 90’s here in NYC. For instance, I got one at 227K, but when the tax bill came, it was assessed base on a value of around 300K.
We went down to file a complaint about the descrepancy and we were told by the city that values coming about based on REOs cannot be used because IT IS NOT A NORMAL SALE BETWEEN BUYER AND SELLER, and cannot be used.
So, if such an argument can be used on a tax bill, it can be raised on an appraisal as well, as we’re talking about using “sales price” for comps. In my case, I’m told the sales price I paid is irrelevant.
And I have to agree that a comp based on a NORMAL sale would’ve been 300K as I had realtors show me nearby comparable properties for sale at the time.
Finally, when you made the purchase, was it based just on comps of the two rehabs done by the “real estate”, or did you look at other comps in the area??
Frank Chin
Re: Has anyone ever heard of this one? - Posted by Tommy T
Posted by Tommy T on April 11, 2004 at 01:45:01:
Really not clear on what you mean, “bought by a Real Estate”…? A
real estate what?? Anyway, try this:
-
Get a new appraiser, but before he does anything, show him
your comps, ask him if he thinks he’ll have any problem finding
similar comps so as to bring in the approximate same value, let
him know you don’t want to go forward with an appraisal if there
is no point in doing one, i.e., there are no comps to support the
level you need for your refi… or -
Talk to your loan broker, tell him the problem you are having,
he will likely have an appraiser that is more experienced.
What do you mean by your statement? - Posted by David
Posted by David on April 12, 2004 at 16:25:40:
What do you mean by “just sell the loan in the back end”?
i thik i know which company your talking about - Posted by tray giddens , Houston
Posted by tray giddens , Houston on April 13, 2004 at 08:42:36:
Hi jason, i know you work in houston and i was looking at some mls data on these very same properties… the same agent lists it , sells it in 10 days, then has it relisted for some ludicrous amount, then it’s resold in a very short time frame…
if you have access to the mls you can see the archive report on these properties and it’s obvious what’s going on… however , i just assumed that they were getting uninformed buyers looking for owner financing and really screwing them over… you propose a much more sinister scheme in which multiple parties are conspiring to intentionally commit fraud. i’ve checked comps on some of these properties and i ca’t see how they are getting appraised… it’s not even close. I’m pretty sure were talking about the same group… when driving around town i see there signs everywhere…
Re: Has anyone ever heard of this one? - Posted by Mike
Posted by Mike on April 11, 2004 at 09:16:36:
Jeez, what ever happened to integrity! This is what gives us honest people a bad name. This house I am keeping for a large rent roll (approx. $1,100.00 a month positive). I am going to speak to my loan officer and see what they say. This really sucks. I can’t believe there are such low lives out there!
Re: Yes, new appraisal guideline - Posted by Mike
Posted by Mike on April 11, 2004 at 09:19:55:
Yes, but then it makes no sense. The market in NY is crazy. A home that was bought 6 months ago already has gone up 5%! So if someone owns a home for 36 months and doesn’t refi how will the comps be accurate? Besides, if they do refi, the appraisal is not public record so how can the appraisers get any accurate info?
Sounds wrong to me.
Re: Has anyone ever heard of this one? - Posted by Ben (NJ)
Posted by Ben (NJ) on April 11, 2004 at 10:19:49:
Frank, check out today’s New York Times. There is a story about many homes in the Poconos going into foreclosure for similar reasons.
Re: Has anyone ever heard of this one? - Posted by Mike
Posted by Mike on April 11, 2004 at 08:51:28:
When I bought the house it was based on comps from RE owned rehabs to regular sales. The problem I have with these older areas are that the owners are either very old wanting to sell ‘as is’ or these houses have been legitimately rehabbed. It is hard to find a house in excellent shape that needs nothing in these areas that are owned by elderly people. Had I known about this I would have inquired before I started the Refi.
Re: Has anyone ever heard of this one? - Posted by Mike
Posted by Mike on April 11, 2004 at 08:44:10:
Here’s the problem with that. The Bank (Ditech.com) are one of the few banks who will get you an unbelieveable rate and allow you to refinance without having you wait 1 year (seasoning). I will speak to my loan officer Monday and provide the comps. I did show the appraiser the comps and he told me they are not eligible due to the real estate owned transaction.
I’ll let you know how it goes. I have NEVER heard of this before. Wanted to know if it was a law that may have passed.
Mike
Re: What do you mean by your statement? - Posted by Qinvestor
Posted by Qinvestor on April 12, 2004 at 16:53:43:
What I meant was, I would take a small down payment from the buyer, and take back a note for the balance of the purchase price. Then I would turn around and sell the note for cash to a discount note buyer, however they will buy the note at a discount because they do need to make money somewhere.
- Q
Re: Has anyone ever heard of this one? - Posted by jasonrei
Posted by jasonrei on April 11, 2004 at 09:28:11:
These scams have affected my business. Rehabs and quick sales are looked at more closely, and even rejected without much review. I’d say my houses avg an extra 2 months on the market ($1000 per month holding costs) as a result, and maybe a few hundred on the net sale. Plus my time in following up, and having sales kick out. My guess is $3000 less on my average deal because of the scammers out there, maybe more.
Mike, all you can do is keep trying to get what you want. Try to get a different appraiser through that mortgage broker. If that doesn’t work, get a new lender all together. If your house really is worth what you say it’s worth, you shouldn’t have to look for long.
Whether or not someone refi does not matter - Posted by MoniqueUSA
Posted by MoniqueUSA on April 11, 2004 at 12:24:22:
Whether or not someone refinances in the last 36 months does not matter. They are looking for sales where the seller owned the house for 36 months or longer.
Example
101 Main St sold by A. Adams on 4/1/04 for $300K – Mr. Adams owned his house for 5 years
102 Main St sold by B. Baxter on 3/15/04 for $320K – Ms. Baxter owned her house for 1.5 years
103 Main St sold by C. Caldwell on 2/10/04 for $305K – Ms. Caldwell owned her house for 4 years
Only the Adams and Caldwell comps can be counted. (Both Adams and Caldwell could have refinanced several times during their ownership. That would not matter.)
MoniqueUSA
Re: Has anyone ever heard of this one? - Posted by Tommy T
Posted by Tommy T on April 11, 2004 at 11:07:38:
I have never heard of this before either. Doubt that it is a law, rather arbitrary rules of the appraiser or the lender…did DiTech arrange the appraisal or did you?
We always get an appraisal on our own before we shop for financing. Some lenders use appraisers that seem to be ultra conservative and have funny rules. Almost always when we bring in the appraisal, the lender will accept it. That way we don’t have unpleasant surprises like you are experiencing.
Might be time to look for another lender. Anyone out there know of other lenders without seasoning required for refi?
Have you thought of finding private money? There are lots of people out there right now making 2% on their CD’s that would love to be making 6 to 8%.
Good luck, keep us posted!
I’m a little confused too… - Posted by Ben (NJ)
Posted by Ben (NJ) on April 11, 2004 at 10:25:28:
if the comp sales you are using were arm’s length transactions, I don’t see the problem, no matter who the seller is. I have foreclosed on houses, rehabbed them and sold them on the open market. That doesn’t make my sale any less valid than any other. Of course if these are sales to strawmen and related entities then that’s a different story.