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Well, that's just, like, your opinion man

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March 06, 2009 – Comments (4) | RELATED TICKERS: BAC , C

The housing market is a mess, and I have a feeling that we'll be seeing criminal fallout from shady deals coming to light for a long time. For investigators it will be like playing real estate Whac-A-Mole -- if all the moles popped up at the same time.

 

One area that seems like it will be ripe with ne'er-do-wells is the real estate appraisal industry. Though I imagine most appraisers stuck with the conventions of the industry (even though I'm not sure I agree with those conventions), many mortgage fraud schemes wouldn't have gotten off the ground in the first place without an appraiser that would play along.

 

Why do I bring this up? Even with all the other shenanigans going on out there -- Citigroup, Bank of America, John Thain, Bernie Madoff -- the story of this convicted appraiser jumped out at me.

 

This story comes from Cuyahoga County, Ohio and involves a scheme of falsified loan documents, a fake down payment, and an inflated appraisal. To read the details of it, it sounds like the kind of thing that could have happened across the country. But here's where the case stands out -- the prosecutor on the case said that the accused appraiser, Lavon Ivy, argued in her defense that "appraisals of homes are primarily based on opinion."

 

The problem here is that, taken apart from the very clear criminal activity that Ivy and her accomplices took part in, the suggestion that house prices are a matter of opinion probably wouldn't jump out at most people as a crazy statement. After all, what is the value of a home? Is it whatever you think it is? Is it what someone is willing to buy it for? Is it whatever the house next door sold for? Or is defined by some other factor like how much you could rent it for?

 

After a severe housing downturn that has left millions of homeowners underwater on their purchases, maybe it's time to rethink how we value homes so that a statement that suggests prices are a matter of opinion is universally funny. But hey, that's just, like, my opinion. What does everyone else think?

4 Comments – Post Your Own

#1) On March 06, 2009 at 6:29 PM, Seano67 (33.38) wrote:

About eight years ago, my brother was thinking about taking a job as a real estate appraiser. He was a laid-off tech guy who had no training in the real estate field whatsoever, but apparently you didn't really need any (or so they said). I think the most important criteria were that you have a working digital camera, a car, and the willingness and ability to drive around to various houses, snap some pics, give them the most cursory of visual examinations (if you have no training, how thorough can you possibly be? You presumably don't even know what the hell it is you're supposed to be looking for), and that seemed to be about it.

I can't remember what kind of money they were offering him, but it was a lot, and to me it seemed an unusually high amount based on what the job description seemed to be. I got immediately suspicious and just said to him,  "Dude, you know? Doesn't this seem just the teensiest bit sketchy to you??? Does it really seem like something that's on the up and up, and is this something you'd really feel comfortable getting involved with?" He thought about it and decided not to do it, and then landed himself another tech job....but anyway, yes, this does not surprise me in the least. I'm sure there was ALL kinds of sketchy shit going on within the field of real estate

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#2) On March 06, 2009 at 7:19 PM, blake303 (29.23) wrote:

Maybe the criminal activity is the result of an industry employing prior criminals?

http://seattlepi.nwsource.com/local/402545_mortgagefelons06.html?source=mypi

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#3) On March 06, 2009 at 7:39 PM, PrestonCheek (32.40) wrote:

When I built my house 2 years ago I had two appraisals, one was for 202k and the other was 243k. The bank went with the higher appraisal of course but I wonder now what it would go for.

The 202k give me deductions for still having the sand pile in front of the house that they used for the brick, I didn't understand that. It seems like a business that can make up things as they go, no real rule book.

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#4) On March 09, 2009 at 10:00 PM, WEBill (< 20) wrote:

Obviuosly neither the reporter nor anyone commenting has any real knowledge about appraising.  There is a process that is used to appraise property and it the same everywhere. And while the woman in the story didn't use it, the statement that price is an opinion is accurate but the opinion is based on comparibles.  The quality of the comparibles is left to the appraser.  That is where the differance is.

 

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