Appraisal Scoop

Real Estate Appraisers Optimistic About Future: Appraisal Institute Survey

CHICAGO (July 17, 2013) – More than three-fourths of U.S. real estate appraisers are very or somewhat positive about the demand for their services over the next one to two years, according to an Appraisal Institute survey released today.

Eighty percent of residential appraisers and 78 percent of commercial appraisers said they are upbeat about their future, according to the survey conducted in May-June by the nation’s largest professional association of real estate appraisers.

“Appraisers have faced a challenging real estate market in recent years, and it’s great to see that so many valuation professionals are feeling optimistic about the future,” said Appraisal Institute President Richard L. Borges II, MAI, SRA.

According to the survey, 95 percent of residential appraisers and 49 percent of commercial appraisers said there is currently more demand for their services than a year ago.

Additional survey results include:

• Eighty-four percent of residential appraisers said their local residential
  real estate market is strong, and 46 percent of commercial appraisers had the
  same opinion about their local commercial markets.
• Eighty-six percent of residential appraisers and 55 percent of commercial
  appraisers said demand for their services is strong.
• Thirty-two percent of residential appraisers and 45 percent of commercial
  appraisers anticipate more demand for their services during the ensuing one to
  two years.

“Real estate trends are typically local in nature, and it’s a positive sign for the nation’s economy that appraisers around the country reported increased demand for their services,” Borges said.

The online survey polled 591 real estate valuation professionals May 31-June 17. The survey had a margin of error of +/- 4 percent.

View the highlights of the survey results

 

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Solidifi successfully launches EXTRAordinary Appraiser Program to the mortgage industry

BUFFALO, N.Y., July 11, 2013 -- /PRNewswire/ -- Solidifi, the country's third largest independent provider of residential real estate appraisals and appraisal service provider of choice for 50% of the top 50 lenders in the U.S., turned the spotlight on top appraisers in the industry with the launch of its EXTRAordinary Appraiser Program.

"Our core strength is the elite network of Solidifi PerforMAX™ appraisers we have built up across the country," says Andrew Bough, Chief Valuations Officer at Solidifi. "But so often these top appraisers are the unsung heroes of the valuation process. We decided to change that by creating the EXTRAordinary Appraiser program to recognize their efforts and turn the spotlight on the great work they're doing on behalf of lenders, homeowners and the mortgage industry."

The EXTRAordinary Appraisers are local experts from across the country and have proven time and again to go above and beyond for Solidifi's lender clients and borrowers. In fact, each Solidifi PerforMAX™ appraiser is benchmarked against their peers using dozens of metrics to ensure strong performance, quality, expertise and customer service. "Our regional appraiser partner managers work one-on-one with and personally assess each appraiser in their market to ensure a high level of effectiveness on all levels," says Bough. "At any given time, we know exactly which appraiser is best suited for a given assignment and each of our appraisers competes for business based on their performance. It's a key differentiator for us and a key competitive advantage for our lender clients."

That's why Solidifi chose to recognize those all-important efforts and expertise on a grand scale by launching the EXTRAordinary Appraiser program and hosting the inaugural recognition event recently at the annual Valuation Expo in Las Vegas. 30 EXTRAordinary appraisers were celebrated at a private reception (see the complete list of honourees below). "It was an honor to be recognized for something I often take for granted," says Paul Lewis, Independent Appraiser, Orono, MN. "In a profession full of deadlines and stress, it's nice to know that my efforts are appreciated." 

Paul Lewis and each of the 30 EXTRAordinary appraisers recognized in Las Vegas as well as future EXTRAordinary Appraisers will be regularly featured at Solidifi.com. "We invite you to log on to solidifi.com to learn more about these unsung heroes," says Bough.  

These top performers are supported by Solidifi's industry leading technology and analytics platform, which identifies the right appraiser for each assignment up front. In effect, Solidifi is using technology to build efficiency throughout the appraisal process, increase quality, drive costs out and improve the client experience. It's a winning value proposition all around: the appraisers are top of their field and are highly compensated for their efforts at no additional cost to the lender. The lender receives the right information the first time with no additional costs because the system is streamlined and designed to drive performance. The lender also benefits from Solidifi's focus on being the best provider of real estate appraisals in the market.

That's because the Solidifi PerforMAX™ appraiser network is comprised of the most competent appraisers in the business. They raise the bar in terms of service, quality and professionalism.  "And that's why we want to show our appreciation and share with the world the great work they are doing," says Bough.  "It's time to celebrate these EXTRAordinary Appraisers."

Solidifi's Inaugural EXTRAordinary Appraisers:

JoDean Brewer, Castle Rock, CO

Amber Brooks, Phoenix, AZ

Nikki Brown, San Diego, CA

Blake Childs, Costa Mesa, CA

Jason Doll, Wichita, KS

Anne Elmes, Poughkeepsie, NY

Pat Felvey, Genoa, IL

Mark Giannini, Steubenville, OH

Teresa Gillis, San Jose, CA

Pat Grengs, Little Canada, MN

Christopher Hickman, Las Vegas, NV

Stacy Hosmer, Cutler Bay, FL

Aaron Johnson, Las Vegas, NV

Mark Levering, Henderson, NV

Paul Lewis, Orono, MN

Anne Macier, San Marcos, CA

Michael Massa, Fairfield, CT

Jon Nishikawa, Meridian, ID

Antranik Papazian, Las Vegas, NV

Matt Rayburn, Warrenville, IL

Mark Reed, Goodyear, AZ

Priam Rosenberg, Miami, FL

Paul Rowe, Park Ridge, IL

Carmen Smith, Brookfield, IL

Steven Somerville, Tampa, FL

Vincent Tamburello, Smithtown, NY

Andrew Turley, Scottsdale, AZ

Steve Varon, San Francisco, CA

Jed Wiltchik, Irvine, CA

Mark Yarkin, San Ramon, CA

About Solidifi

Solidifi is the 3rd largest independent provider of residential real estate appraisals in the US. Today Solidifi is the appraisal service provider of choice for 50% of the top 50 lenders. The organization offers a flexible technology platform for procuring collateral valuations from an elite network of over 23,000 high quality appraisers who openly compete for business based on quality, speed and price. Solidifi's parent company Real Matters is ranked 21st on Deloitte's Technology Fast 500. Solidifi is located in Buffalo, NY. Additional information about Solidifi is available at www.solidifi.com.

SOURCE  Solidifi

Read more here: http://www.sacbee.com/2013/07/11/5559916/solidifi-successfully-launches.html#storylink=cpy

The appraisal profession - Looking ahead, the current system needs some enhancements

GUEST AUTHOR: William Pastuszek, MAI, SRA, MRA heads Shepherd Associates, Newton, Mass - See more at: New England Real Estate Journal Network.

Do you remember how you became an appraiser? Did you have a friend in the business? A mentor? A family member? Perhaps someone who brought you into the business? Think about how you would get into the business today if you were starting out.

We like our profession for different reasons. Part of our fondness comes from the fulfillment of carrying out the appraisal process, the mental challenge of solving the "puzzle," the fieldwork, the variety in assignments, the people we meet, the flexibility, and the satisfaction in providing a critical service.

We work for banks, mortgage companies, lenders, the government, corporation, individuals. We work within corporate structures, lending environments, in institutional and governmental settings, in small companies, for ourselves.

We are licensed individually. We have our responsibilities under USPAP as appraisers. We have our professional opinions which take precedence over our very personal opinions.

It's a challenging, mostly fulfilling profession. At best, we are looked at as impartial, responsible providers of independent and credible opinions. At worst, we are looked at with scorn and condescension, with a lack of understanding of what we do, as order takers/numbers makers. Recent regulation and oversight has created even more work of doubtful relevance.

We take our responsibility to maintain the public trust seriously. We complain about low, slow pay, abusive clients, and difficult working environments. Nonetheless, most of us probably would not rather be doing anything else.

Is an appraiser shortage upon us? My own experience bears this out: no doubt yours may too. Studies show that expected employment of appraisers (and assessors) will rise only 7% between 2010 and 2020: this is slower than the rate of all occupations. License numbers are down. Why has this happened, as the current need for appraisers is strong?

We remember the financial meltdown. There were several years where there wasn't much demand for anything, including appraisal services. Things have changed in a very short time in real estate markets, and the need for appraisal services for lending purposes has revived significantly.

Entry level classes are once again filling up. Appraisal firms are looking for associates. Clients are looking for appraisers that can do quality work in a reasonable time frame.

There are barriers to entry to the profession. Many lenders won't accept trainees signing reports. This shuts out many potential appraisers from acquiring necessary experience. The Appraisal Qualifications Board (AQB) has created high barriers to entry into the profession with requirements to increase going forward.

Appraisal organizations provide education which is often expensive and difficult to access and which requires travel. On line primary education, as it matures and becomes accepted, will likely solve that problem, but it may not be a total solution.

As the vast majority of appraisers do residential work for lending transactions, is the system set up to serve the requirements of this system? Clearly, the real estate crash did nothing to enhance confidence in the lending system but do high entry requirements raise the quality of the applicant? Maybe so. Does requiring a college degree really advance the needs of the profession? Do we need a more realistic two-tiered system? Is the higher education system set up to train appraisers? It's not. Other professions have college training. Appraisal has been working at this for many years and has had little success in making training part of a college education, just like engineering or accounting.

Jobs are still hard to come by. Is entry into the profession being encouraged? Many young people view residential appraisal as a vocational track. Then they see the daunting requirements and the relatively poor initial prospects. Many newer entrants are job changers, second careers. Are appropriate opportunities available in the largely balkanized employment environment of mostly small, independent shops?

How do we make appraising accessible to newcomers? The current system needs some enhancements.

Assuming that appraisal demand stays steady or increases, there won't be enough appraisers coming in to replace those going out. With a shortage of bodies, users may well look to other solutions. In these scenarios, appraisers will once again not be in control of their profession and will be scrambling to react.

Click HERE for the complete article.

GUEST AUTHOR: William Pastuszek, MAI, SRA, MRA heads Shepherd Associates, Newton, Mass. - See more at: http://nerej.com/63699 

10 Tips for Brokers to Help the Appraisal Process - Appraisal Insight Blog

REPRINTED FROM APPRAISAL INSIGHT BLOG - AUTHOR: Vic Knight has been a licensed real estate broker in North Carolina since 1984. He's also a Certified General Appraiser in the state and is past president of the North Carolina Association of REALTORS®. He has chaired NAR's Appraisal Committee and currently is a member of the Board of Trustees of The Appraisal Foundation. 

10 Tips for Brokers to Help the Appraisal Process

 

1. Don’t restrict the appraiser from making an appointment to inspect the property (if your MLS uses an appointment system, use it. You will be notified of the appraiser’s site inspection).
2. If an appraiser calls, be responsive and provide as much information as needed. Return the call promptly even if your listing has closed. (Brokers are the expert source of information on your listing.)
3. Be as descriptive in MLS as possible about your listing and include as many photos as your MLS system will allow (include photos of: Front, Rear, Street, and ALL major rooms & property features).
4. Don’t use or reference tax records as your source of information. Do the proper legwork on your listing; it builds significant long-term credibility among your peers and local appraisers.
5. Distinguish “above-grade” living area from “below-grade” living area in your MLS, particularly the quality of finish in below-grade living area, attics, bonus rooms, decks, porches, and so on.
6. Provide an “Appraisers Package” in advance, and have it available at the property when the appraiser is inspecting the property, or meet the appraiser at the property so that you can answer any questions or inform the appraiser of the unique features of the property or neighborhood. Make sure you allow the appraiser the space and time to complete their inspection (Appraisers Package could include plats, surveys, deeds, covenants, HOA documents, floor plans, specifications, inspection reports, neighborhood details, recent similar-quality comparables, detailed list and dates of upgrades and remodels, and energy-efficient green features).
7. Provide a fully executed copy of the purchase contract, with all addenda.
8. Explain, to the seller or buyer that the roll of the appraiser is not to confirm the sales price but to provide the lender an independent, objective and impartial opinion of the value of the underlying collateral which the loan would be based on. Provide the seller or the Buyer a copy of the brochure developed by The Appraisal Foundation entitled “A Guide to Understanding a Residential Appraisal,” available from NAR to view or download at  http://www.realtor.org/appraisal/a-guide-to-understanding-a-residential-appraisal
9. Real estate salespeople and consumers can be present during the appraisal inspection. Make sure all parties allow the appraiser the space and time to complete their appraisal inspection, uninterrupted.
10. Make sure the property condition (inside and outside) is the best possible for the appraisal inspection, and inform the seller that interior and exterior photos (and measurements) must be taken by the appraiser.

 

SOURCE: APPRAISAL INSIGHT

 

Vic Knight

Vic Knight has been a licensed real estate broker in North Carolina since 1984. He's also a Certified General Appraiser in the state and is past president of the North Carolina Association of REALTORS®. He has chaired NAR's Appraisal Committee and currently is a member of the Board of Trustees of The Appraisal Foundation. Vic’s nearly 30 years in the real estate business includes owning and managing a Century 21 residential brokerage firm, extensive residential and commercial development, and residential property management. Vic is currently the owner of Appraizr.com, a real estate consulting and full-service residential and commercial appraisal firm. Vic is a graduate of the Instructor Training Institute and has authored and taught numerous real estate brokerage CE courses since 1998. He holds a BS in Civil Engineering from North Carolina State University and was a practicing professional engineer with the Bechtel Corp., an international construction company headquartered in San Francisco, Calif. Vic is chair of the North Carolina Real Estate Commission, a position appointed by the governor.

 

 

 

Appraisal Institute: How Landscaping Can Impact Home Values

Source: Posted By susanne On May 19, 2013 @ 1:06 PM In Business Outlook,Real Estate Information,Real Estate News,Real Estate Trends,Today's Top Story

 

The Appraisal Institute recently advised homeowners to properly maintain their landscaping, which can significantly affect property values.

“If a landscaping change is positive, it can often enhance price and reduce a home’s time on the market,” says Appraisal Institute President Richard L. Borges II, MAI, SRA. “But if the change is negative, it can lower the price and lengthen the time a home remains for sale.”

Curb appeal is essential when selling a home, Borges says, noting it’s the homeowner’s opportunity to make a great first impression. A home with lackluster landscaping or an exterior in desperate need of a fresh coat of paint will likely be unappealing to prospective buyers and ultimately could affect the home’s potential resale value, he said.

Landscaping is typically associated with lawns, trees, bushes and flowers. But other items also can be considered part of landscaping, such as fire pits, decks, patios, waterfalls, swimming pools and outdoor lighting … all of which could add to the value of the home.

Borges says homeowners should ask themselves the following questions when it comes to the quality of their home’s green space:

• Is the landscaping attractive enough to make the prospective buyer walk through the front door? Keep the design contemporary and in line with comparable properties in the area.

• Could the landscaping provide cost savings? Landscaping that requires little or no water to maintain could be desirable depending on the geographic area.

• Is the landscaping energy-efficient for the home overall? For example, it’s a good idea to plant trees in a place where they block the sun in locations with year-round hot climates.

• are the trees planted at a safe distance from the home and are they healthy and well maintained? Weak, old or damaged trees planted too close to a home or building could pose dangers to the home’s structure and will need to be removed. Consumers should also be sure that mulching or beds don’t get too close to wood around foundations to avoid wood-destroying organisms.

For more information, visit www.appraisalinstitute.org

Click here for the COMPLETE ARTICLE - How Landscaping Can Impact Home Values

U.S. Senate Candidate FINALLY Pays 2005 Residential Appraisal Fee

Mass. GOP Senate candidate pays 2005 appraisal fee by Steve LeBlanc Associated Press / May 16, 2013

BOSTON (AP) — Republican U.S. Senate candidate Gabriel Gomez said he has paid an eight-year-old, $1,000 bill for an appraisal on his Cohasset home, even as he again called on Democratic challenger Edward Markey to release his tax returns.

Gomez paid the fee Thursday, after The Boston Globe reported that the appraiser had filed a claim against Gomez in small claims court.

‘‘I'm surprised to hear this $1,000 bill after eight years,’’ Gomez told reporters during a campaign stop in Quincy on Thursday. ‘‘Quite frankly, I don’t even recall the bill.’’

The appraiser said Gomez hired him in 2005 to help determine how much he could deduct from his federal tax return in exchange for agreeing not to make alterations on the facade of the historic home.

Gomez reportedly declined to pay the fee after receiving a more generous evaluation from another appraiser. Democrats have criticized the $281,000 tax break, saying local bylaws already prevented Gomez from changing the facade of the house. 

Read the complete story - click here

The Reality of Price Per Square Foot

GUEST AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc.  Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets.

As appraisers, we talk to realtors on a routine basis. Whether it’s to set up an appointment, verifying data or even just shooting the breeze, their insight can be invaluable as we analyze a property and its
market. There are however vastly different concepts between how realtors market properties and how appraisers observe market behavior. One such example is the use of price per square foot.

As an equation, price per square foot ($/SF) is simply the asking or selling price divided by the gross living area. It has become common lingo among many realtors but is it a reliable indicator of market reaction?

Now as an over-simplified reference point, we may not object to its use however it has been a growing rationale for agents, buyers, sellers and homeowners to establish value.  I must admit when I hear the price per square foot argument as a means to value, my inner-appraiser starts to rev up into high gear. Shakes, convulsions and a flushed face are quickly tempered as I remember that we must educate if we
intend to explain the weaknesses of the price per square foot methodology.

The primary fault with $/SF is that it encompasses every feature of the property and not just gross living area. Only calculating the relationship between size and sales price ignores all the considerations a
potential buyer may make. If we were comparing two properties that were identical with the exception of size, then it is rational that the larger of the two may sell for more and thus the $/SF could be an accurate indicator. On the other hand, if we had two identical homes in terms of size but one had a
larger wooded lot and sold for more, the equation would not be as reliable. As properties have more dissimilar amenities and features, the less reliable it becomes as a function of indicating value. This is simply because other factors are not directly related to gross living area.

The same issue exists for price per acre in residential (non-agricultural) sites. While one acre may sell for a specified amount, that does not necessarily mean two acres will sell for twice what the one acre parcel did. There may be a premium for the excess or residual land but not based on a simple multiplier
factor.     

That being said, price per square foot can be a tangible factor in considering cost. Builders and index providers such as Marshall & Swift do utilize $/SF for construction estimating but it is not a strongly supported methodology for market valuation. The grid technique that is commonly utilized in most appraisals (Fannie Mae 1004) as part of the Sales Comparison Approach allows individual analysis of key amenities for the subject and comparable properties. Market derived adjustments can then be made to comparables for superior or inferior features.  The Sale Price/Gross Living Area field that is a part of the grid section is intended to be a general indication of the overall similarity of the subject to the selected comparables and not a basis for value conclusion.

A few years back, I had a call from a buyer who questioned my method for obtaining the gross living area (GLA) of a property he was in the process of purchasing. After explaining my physical measurements, Fannie Mae Seller Guidelines and ANSI standard Z765, he eventually backed out of the contract because the appraisal reflected a smaller GLA than it was marketed as. This seemed to go against all that we typically assume. He was in effect making his decision largely based on perceived GLA and not based on the features and amenities that the property offered. While he was an anomaly, it is true that buyers have varied motivations for their purchasing decisions.

If price per square foot was truly a common buyer consideration, then it is fair to expect that purchase offers would be made in these terms. Rather than a lump sum price, buyers would submit offers based on the square footage of the property and not a flat price that reflects all features.

If properties become widely marketed on the $/SF premise, is it possible that buyer behavior could evolve? It is unlikely that a simplistic math equation will change the diverse motivations of buyers but it could skew initial listing prices and then filter down through purchase offers. In any case, all parties involved in the real estate transaction process should have a basic understanding of motivation and reaction factors and not implement an overly simplistic formula for price determination.       

AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc.  Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets. He served as a staff appraiser at several local firms before forming AM Appraisals, Inc. with business partner J.M. Massey.

e-mail:[email protected] web address: www.amappraisals.com

Related articles

A Flawed Plan: Squaring up to the obsession with price per square foot

NAHB Calls for Overhauling the Appraisal System

Its “blueprint” for reform focuses on streamlining standards and their enforcement, expanding education and training, and upgrading real estate data.

By John Caulfield - John Caulfield is senior editor for Builder magazine.

A “dysfunctional” appraisal system can be fixed only if its regulatory framework is streamlined, its credentialing standards are made uniform, and the criteria used to ascertain real estate valuations are based on a combination of cost, income, and sales comparisons.

Such are the findings of a white paper released by NAHB on January 24, which spells out the association's “blueprint” for appraisal reform including a host of recommendations formulated last year by a working group comprised of builders and officials from the financial and appraisal sectors.

The goal of reform, NAHB states, is to “rebuild the nation’s housing finance system …, restore confidence in the real estate market, and establish a foundation for sustainable growth in the U.S. economy.”

The working group broke down its recommendations into four areas:

• Regulatory framework and oversight.
• Data and technology.
• Professional standards.
• Practices, processes and procedures

Click HERE for the complete article

 

 

Reference:

Major Overhaul of Appraisal System Long Overdue, White Paper Says [11/7/2011]

“Reengineering the Appraisal Process Redux

 

 

Real Estate Purchase Contract Scams - Tricking Appraisers To "Hit The Target"

GUEST AUTHOR: Vernon Martin, the founding principal of American Property Research, performs paid research, due diligence and valuations regarding commercial real estate
throughout the world. He has 28 years of commercial appraisal experience and has
worked in 20 countries, 39 U.S. states, and four Canadian provinces. He was  previously the chief commercial appraiser at 3 national (U.S.) lending institutions, formerly taught Real Estate Valuation at California State University, Los Angeles and has authored many professional journal articles and two books.

The appraisal textbooks don’t mention these, so I will.  Real estate purchase contracts are often
constructed to mislead lenders and appraisers.  Various ruses are used to inflate stated purchase prices above market  value, with the hope of tricking an appraiser into valuing a property at above market value and tricking a lender into offering a loan at an imprudent loan-to-value ratio.  

What the buyer and seller are counting on is a phenomenon known as “anchor bias”, the tendency of appraisers to offer an appraised value identical to the purchase price. Various academic studies have indicated that this happens about 96 to 97% of the time, although some appraisers seem to have been getting wiser lately.  Some ruses that I have recently seen include the following:

1. The “soft second” mortgage loan – forgivable seller financing used to inflate the contract purchase price.  

My last appraisal assignment presented such a possibility. It was an $8 million purchase contract which was contingent upon $4 million in first mortgage financing, supplemented by seller financing of $4 million. The buyer would have no equity in the property, a situation that presents a high risk for loan default.

I suspected that the seller financing was a “soft second”, a seller concession disguised as a fake loan. My suspicion was well supported by a contract purchase price which was $1.6 million above the listing price for a property that had been marketed for almost 3 years. I found the listing on the Internet.  

Normally, the term “soft second” in the real estate industry refers to a legitimate second mortgage loan made at a below-market rate, perhaps subsidized by a government agency or a nonprofit entity. In some cases, though, the seller financing is not meant to be paid back. It is a price concession in disguise, meant to inflate a contract purchase price.

An appraiser cannot be sure the second mortgage is real or fake, so he must look for clues, the most obvious of which is that the purchase price is not supported by comparable sales or the purchase price is above the asking price. The lack of equity contributed by the buyer should also make lenders and appraisers think twice.     One would think that some government agency or appraiser association would issue an “all points bulletin” on this deception, but this scam continues to this day.

2. Unsigned purchase agreements in draft form.

 

I have seen a proliferation of this trick in the last 2 years, and am currently witnessing it happen on a
transaction in Puerto Rico.  The buyer just says that the purchase contract has not yet been finalized and submits his own version, usually in MSWord, with a different price.  Very simple, but these deceivers are counting on appraisers or lenders who will believe anything.  

 

Normally, an application for a purchase mortgage loan comes with an already-signed purchase agreement with contingencies for financing. Why and how could there be a closing without a definitive purchase agreement? An agreement that is not written is commonly known as not worth the paper it is written on. There is no reason for an appraiser to accept an unsigned, draft purchase agreement as a reliable indication of value.

 

3. The double escrow
 
This is when there are two purchase contracts for the same property.  The first purchase contract is the legitimate one, and once closed, the buyer can then sell at a higher price to an entity he controls in a different purchase contract that he will submit to lenders and appraisers.  The latter transaction, however, is a sham "pocket-to-pocket" transaction.

 
4. Secret partnerships and "transaction facilitators"
 
In one instance I met with the owners/sellers of swampland intended for development of a marina residential community. The buyer and sellers were old friends. I was presented with three conflicting purchase contracts, and whenever the story keeps on changing, that is a good sign of deception. After four hours I asked Mr. Seller where he would  be moving to. He seemed surprised and responded, "I'm staying here, of course.  I've got a lot of work to do!" which made it clear that he was part of the development team. I looked at his wife, whose facial expression said "How can my husband be so stupid?"

I discovered  one company in Arizona that advertised "transaction facilitation" services. Step 1 is that the buyer forms a joint venture partnership with the transaction facilitator in buying the property in the guise of an LLC or Limited Partnership. Step 2 is the shell company (the LLC or LP) sells to the buyer
again at a higher price in a sham transaction designed to trick a lender and maximize financing.
 
Another type of "transaction facilitation" is those services which "rent" cash down payment money overnight to buyers while the purchase price is inflated to cover the amount of the phony down payment.  Law enforcement has been shutting down such operations in the United States.

Other purchase contract deceptions 

 

It is risky, any way, for an appraiser to automatically assume that a contract purchase price is identical to market value.  I have seen fake purchase contracts and purchase contracts which disguise the fact that the buyer and seller are one and the same. I have seen purchase prices inflated by real estate
syndicators who are compensated as a percentage of the transaction price.

 

Many appraisers are so convinced that the purchase price is real that they make the mistake of making
unconventional adjustments to sales data to support the stated purchase price. They may choose much newer properties or much smaller properties as comparable sales and fail to make adjustments for age or size.
 
Questions to ask
 
The first thing I do in analyzing the purchase transaction is to peruse the Internet to try to find the property listed for sale. LoopNet and realtor.com are good sources, but sometimes if you just google the address of the property, you can find a more obscure listing. When I find the property listed at a price below the contract purchase price, and the property has already spent a substantial time on the market, that is cause for suspicion.

The next question I ask the buyer and the seller, separately if possible, is "who were the listing broker and the buyer's broker on this transaction?" The reason why I ask is that I see so many purchase loan applications which are not represented by a broker, begging the question of how the buyer and seller found each other in a market with so many properties listed for sale. 

If there was no broker, there was most likely no listing or advertising, meaning the buyer already knew the seller, increasing the odds that the purchase transaction is not arm's length or even a
"pocket-to-pocket" transaction with the owner buying the property from himself with my client's financing. Past experience has shown me that this is a way to make the lender the unintentional buyer of a hard-to-sell property.

One tell-tale sign of a fraudulent purchase is when the buyer complains that the value is too low. In legitimate purchases, the buyer often uses a low appraisal to negotiate a better price, and they sometimes even thank me, but when a buyer starts making phony excuses as to why the appraised
value should be higher, it is a signal to me that the buyer is either already affiliated with the seller or else the buyer and seller have negotiated a separate purchase agreement and the contract I was given was
phony.

Recent adverse publicity for the appraisal profession
 
The National Association of Realtors (U.S.) has recently unleashed their well-funded publicity machine to criticize appraisers for failing to "hit" purchase prices. They publicize sob stories of realtors whose purchase deals fell apart.  "I had a bona fide purchase contract and the incompetent appraiser appraised it too low!" Such things could be said about me, too, but nothing is being said about the epidemic of deceptive purchase contracts nowadays.
 
To appraisers who think they must "hit" the purchase price:

If it was really true that the market value of a property is always the same as the purchase price, there would be no need for appraisals, would there be?

 

AUTHOR: Vernon Martin, the founding principal of American Property Research, performs paid research, due diligence and valuations regarding commercial real estate throughout the world. He has 28 years of commercial appraisal experience and has worked in 20 countries, 39 U.S. states, and four Canadian provinces. He was previously the chief commercial appraiser at 3 national (U.S.) lending institutions.  Full profile: click here

Nightline from ABC News: Secrets of a 48-Hour Home Appraisal Makeover

This family purchased their home six years ago for $325,000 and are currently asking $225,000.  They recently had the home appraised for $190,000.  ABC called in Barbara Corcoran, real estate expert (and on the panel of TV's "Shark Tank") for her advice.    ABC then called in an "Appraisal Expert" to help this family raise their $190,000 appraised value by $24,000 in just 48-hours!