Florida Mortgage | Realtor Fraud Reports
By David A. Podgursky • Dec 5th, 2007 • Category: Residential MortgagesRISMedia sent out their newsletter today and the top story was Realtor Caught in Cash-Back-at-Closing’s Crosshairs. The story is about a Realtor in St. Petersburg Florida who was caught in a transaction involving an inflated sales price to provide the buyer with cash back at 
closing.
Unfortunately, these deals are often overlooked and don’t seem to be such a bad thing to most people - even those that know that they are fraudulent. The big issue in this case isn’t the fraud - it is the Realtor’s choice to argue ignorance as a defense.
The cardinal rule in almost every state’s Real Estate Commission and Association of Realtor defense tactics playbook is "Ignorance is no excuse".
This case begins innocently with our Realtor listing a property. There were lower offers but nothing near the asking price. Sounds Familiar, eh?
After receiving a contract and asking the seller for a lower price, the Realtor then received an offer of more than $90,000 above the new lower asking price. The offer was obviously accepted and headed to closing. After closing, the Realtor received an anonymous letter informing her of what had transpired with the cash-back "outside of closing".
While her defense is that an attorney and title company signed off on it so how could it be a problem to her… that really does not say much for her ability to see through the mess that was created in this instance.
The truth is that with all the problems in the industry and the massive efforts at least by the State of Florida to stem fraudulent real estate transactions - aka Mortgage Fraud.
My questions are:
- how would she NOT know to look at a transaction as such?
- How could she in good faith ask for a price reduction which should be based on professionally prepared CMAs, and then figure it was no big deal that an offer came in way over price?
- why would she think that an appraiser would sign off on numbers that much higher than her own?
- Whether she was truly innocent or not, is justice served in this case if she goes unpunished entirely?
If someone wants to present themselves as a professional in the Real Estate and Mortgage Industries, they have to be prepared for those that do not. In this case, the defense of Ignorance just should not cut the mustard.
I hope she has a nice penalty of:
- 14hrs of targeted and tedious continuing education
- extrication of the commission over asking price
- and a 5,000 word essay on the subject in her future.
More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
TheMortgageGoToGuy.com
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida
David A. Podgursky is a Broker Associate for Boca Executive Realty - www.bocaexecutiverealty.com. As a resident of Lake Worth Florida, David succeeds in assisting Buyers and Sellers with their Residential and Commercial Real Estate needs in Boynton Beach, Lake Worth, Greenacres, Delray Beach and Boca Raton Florida.
David is a Florida Licensed Real Estate Broker and Mortgage Broker making him uniquely capable of offering Full Service Real Estate Services to his clients.
From assisting a first time buyer in determining how much they can afford to analyzing an investment for a high end investor to helping a baby boomer decide the best property for their retirement in Sunny Florida, David Podgursky is the Boynton Beach/Lake Worth Realtor to call first!
(561) 504-6949 cell * davidp@bocaexecutive.com
Email this author | All posts by David A. Podgursky
Here is an article I wrote. It may not be exactly realted to your blog, but it is in the same general vein. There is a lot of BAD in the real estate business these days, and numbers (recorded sales prices) do lie. Beware of statistics, choose your advisers with great care.
APPRAISAL BUSINESS UNWRAPPED
A brief history - from the inside
The appraisal business used to be an honest profession!
Appraisers and lenders had a direct and simple bond. The appraiser told the lender the truth, the whole truth and nothing but the truth - the lender had the authority to act - and they did (lend) or did not.
Well, of course, that was too tempting a set up for politicians to let be, so they decided that, this being a money making business, they obviously deserve a piece of the action.
Appraisal licensing was introduced nationwide and, of course in Florida, circa 1991.
There were “Certified Appraisers” who were deemed qualified to appraise property on their own. There were also “registered” and “licensed” appraisers who were not deemed qualified, so they had to work under the supervision of a certified appraiser.
It all worked fairly well for a while, as lenders, brokers and the general public got used to the idea and the system.
Coincidently, as soon as property prices begun to rise, the appraisal board (the body in charge of appraisers in the state licensing division) got flooded with complaints from realtors and homeowners (many spurred on by realtors) that appraisers are not making the values because they are not qualified. Of course that is not exactly how these complaints were phrased. They alleged that “inexperienced”, apprentice appraisers, do not understand the market.
The state saw an opportunity to pressure more appraisers into becoming certified (read - buy the more expensive license). This was a great opportunity to appease the public and to make money; so the regulatory authority removed both the “registered” and the “licensed” designations and replaced them with a more demeaning term “registered trainee” appraiser.
It did not matter how many years of experience these people had. Weather they were in this business for one month or for one decade, they were all trainees. Two people in my office fit that designation even though they had 10 and 13 years experience respectively.
Additional pressure was placed on lenders to consider only certified appraisers as qualified to sign appraisal reports.
But the real estate values kept rising. In fact they were rising at an unprecedented pace.
Appraisers were not keeping up. They were killing deals by the thousands and that was not politically acceptable nor expedient.
Realtors and homeowners were once again flooding the state with complaints about the lack of qualification and market knowledge of the “trainee” appraisers who were killing their deals.
In an unprecedented move, which has not been seen in any similar industry, the regulators decided that “trainee’ appraisers were not only unqualified, but they were just not supervised well enough. From this point on, there will be no more than four (4) “trainees” allowed under the supervision of one certified appraiser.
A mortgage broker can have an unlimited number of junior brokers under his/her supervision (it takes 3 days to get a mortgage broker license in Florida). A real estate broker can have an unlimited number of sales associates under his/her license and supervision. In fact, the most successful real estate business models of late are no more than license farms, where agents place their license, get 100% of the commission an pay a transaction fee. This is deemed adequate supervision, in the eye of the state, of people that are empowered to write legal documents (contracts, leases).
However, even though appraisers ultimately serve institutional lenders, not the public, and institutional lenders presumably know their best interest, appraisers, which are the most trained of all the real estate practitioners (save attorneys) are not qualified, even though certified, to hire more than 4 agents.
As always, the law of “unintended” consequences has produced some interesting results:
- Established companies, with years of experience and good reputations, found it hard to keep adequately staffed
- “Trainee” appraisers, regardless of how many years of experience they had, were finding it harder, if not impossible to get a job
Obviously, they flooded the real estate schools and got certified as soon as they could. ( there were waiting periods of months for courses needed for certification, course prices were raised considerably, etc.)
And yes, the most politically desired consequence of them all came through: the state was selling certification licenses by the thousand!
The final outcome - EVERY “TRAINEE” THAT WAS WORTHLESS AND UNQUALIFIED, AND THAT HAS MANAGED TO BUY A CERTIFICATION, HAS MIRACULOUSLY BECOME WORTHY, KNOWLEDGEABLE AND QUALIFIED TO BE ON HIS OWN.
Time will reveal, that this was the biggest political mistake ever to affect the appraisal industry, and one of the biggest for the lending industry.
Thousand of newly certified and state sanctioned appraisers flooded the market. They found it most expedient to make a living as “independent” appraisers, working alone by developing a symbiotic relationship with one or two mortgage brokers. The broker(s) gave them all the business they had, and the appraiser made sure that all the deals appraised for the number necessary to make the loan.
Who do you think has more to lose? A well established company with a full staff, a reputation and a solid net worth, or a “lone gunman” working out of his truck, living in a rental apartment that managed to get a computer, a cell phone and a license? Who can be most easily bought?
Many such appraisers found themselves faced with a simple choice - make the lender’s number or loose the job and not be able to pay their rent.
Most people don’t start out looking to be dishonest. I trained appraisers for over 17 years and the newbies are more likely to be tight and conservative then loose and accommodative.
But they learn quickly.
It is a sad statement to make, but before all the licensing and the regulation, you, as appraiser served the client. You were looking out for the client’s interest and it did not matter if a realtor or a home owner got upset. You either had clients that trusted you or you did not.
That is no longer the case. You can become subject to state inquires and harassment, to client abuse and lender “black listing” simply because a realtor or a homeowner did not get their deal done and decided to send complaint letters to the state and the lender. I had an attorney threaten to sue me for “restriction of trade” for not appraising his house high enough to meet the contract price.
There are many qualified, honest property appraisers who would like nothing more than to be unbiased and do their job. In the scope of the real estate transaction, the appraiser makes the least amount of money and is the most easily replaced if he does not fulfill the wishes of those that hired him. Imagine a referee begin replaced in the middle of the game if one of the teams does not like a call. Imagine the same referee being told that the only way he’ll get paid is if he reverses the call he just made.
There was a time when the state was making no money from licensing appraisers, and appraisers and their clients interests were aligned. Now the state make millions from licensing fees, lenders do not lend their own money and they “shop” appraisers until they get what they want.
It has been a great ride for 21 years. It’s been love and pain, challenge and opportunity. This business has shaped my life and that of may around me. There is now, more than ever, a need and a noble purpose for this profession. The market forces may dictate the way the future will shape it, or more and more regulation will eventually render the entire exercise worthless. As any business and any business sector, it can adapt and survive, given the opportunity. But regulatory strongholds are its biggest threat. Keep your eyes wide open, follow the money and the path of the future will reveal itself.