The Frustration is getting deeper! This home must sell! (Sarasota: mortgage, lawyer)

[magellan]

Originally Posted by Mike Peterson

That is not mortgage fraud at all.

Dependent a upon ther lender, the seller can pay 3%, 6%, even more out of the purchase price towards closing costs.

That's not what the other poster laid out as a case study. Read it again, it sounds like fraud. The buyer writes a contract for a certain price and terms, and it is accepted by the seller (the home has sold and now there is a meeting of minds between the buyer and seller). Then, after the buyer finds out he can't qualify for the mortgage (because of closing costs or other bank requirements) he goes back and asks the price to be bumped up to the original selling price, and money back at closing thrown in to help him put his financing together. That's an artificially inflated appraisal value, and it's changing documents to make the buyer now a "qualified buyer". It seems to me that it would require some kind of gerrymandering on the part of the mortgage lender, who now has two contracts with two purchase prices and two sets of terms on the same home sale.

I'm no lawyer, but if it looks like a duck and walks like a duck....

Anyway, I apologize lisalisa for hijacking the thread.

[riveree]

Originally Posted by pslOldTimer

I mean, listen to many of you -- as soon as you hear a price that you can;t afford to pay, you all start circling like witches -- Too Much! Drop Your Price! Too Much! Drop Your Price!

[/i]

I don't think that's it. The OP is 6 months in, on the 2nd realtor, has had little interest, and sitting there during an open house with not a body through the door.

The OP needs to sell quickly due to a relocation. Dropping the price may broaden the scope of available buyers.

I think sellers face the same question whether it's a house that is listed for $200k or $600k: "Do I want to sell quickly, or do I want to hold out for my price?".

It doesn't sound like the OP has the time to hold out for price, therefore, much of the advice was slanted towards lowering the price - give them a bargain and move on. That's what I suggested, and I could afford the OP's house, as I'm sure many others here could as well .

[harry chickpea]

"That's not what the other poster laid out as a case study. Read it again, it sounds like fraud. The buyer writes a contract for a certain price and terms, and it is accepted by the seller (the home has sold ...

HUH? If it were only that easy. A contract is always based on contingencies like finding financing, selling an existing house, etc.

... and now there is a meeting of minds between the buyer and seller). Then, after the buyer finds out he can't qualify for the mortgage (because of closing costs or other bank requirements) he goes back and asks the price to be bumped up to the original selling price, and money back at closing thrown in to help him put his financing together. That's an artificially inflated appraisal value, ...

What book are you reading from? The appraisal is performed by a licensed appraiser. If Joe was easily taken, and wanted to sell his home for $10, and an appraiser came in and gave an appraisal of $150,000, would that be inflated? Your logic and assumptions are faulty.

...and it's changing documents to make the buyer now a "qualified buyer". It seems to me that it would require some kind of gerrymandering on the part of the mortgage lender, who now has two contracts with two purchase prices and two sets of terms on the same home sale."

Please re-read the second post. A contract between a seller and buyer is NOT the same as the contract (mortgage) between the buyer and lender.

If it has wings and floats and waddles around on land, and is called a Mallard, it might not be a duck, but a seaplane.

Anyway, thanks for bringing up the caution to watch out for any true fraud.

[magellan]

Originally Posted by harry chickpea

"That's not what the other poster laid out as a case study. Read it again, it sounds like fraud. The buyer writes a contract for a certain price and terms, and it is accepted by the seller (the home has sold ...

HUH? If it were only that easy. A contract is always based on contingencies like finding financing, selling an existing house, etc.

... and now there is a meeting of minds between the buyer and seller). Then, after the buyer finds out he can't qualify for the mortgage (because of closing costs or other bank requirements) he goes back and asks the price to be bumped up to the original selling price, and money back at closing thrown in to help him put his financing together. That's an artificially inflated appraisal value, ...

What book are you reading from? The appraisal is performed by a licensed appraiser. If Joe was easily taken, and wanted to sell his home for $10, and an appraiser came in and gave an appraisal of $150,000, would that be inflated? Your logic and assumptions are faulty.

...and it's changing documents to make the buyer now a "qualified buyer". It seems to me that it would require some kind of gerrymandering on the part of the mortgage lender, who now has two contracts with two purchase prices and two sets of terms on the same home sale."

Please re-read the second post. A contract between a seller and buyer is NOT the same as the contract (mortgage) between the buyer and lender.

If it has wings and floats and waddles around on land, and is called a Mallard, it might not be a duck, but a seaplane.

Anyway, thanks for bringing up the caution to watch out for any true fraud.

Well thanks for your well wishes, but I still think it's "true fraud"

Well let me ask you, if an appraisal is always just based on the "market value", (as in your $10 example), then why does the appraiser always want a copy of the sales contract? Answer: because the most weight is given to the buyer/seller agreed upon price than on comps. Comps are only part of the equation. It doesn't matter if an appraiser is "licensed", they generally go by what is given to them in the form of the PA, and are usually not privy to the entire process.

One of the forms of mortgage fraud is "misrepresentation to make a buyer qualify who wouldn't normally qualify for the loan". In this case, the buyer couldn't qualify at the $370K price under his normal financial status, the price is jacked up from $370K to $400K, now the buyer qualifies because the extra $30K goes toward his down payment. He hasn't brought ANYTHING more to the table to increase his eligibility of the first contract. There are probably many cases of this happening, but as far as I know, it's illegal. If it's not illegal, then go ahead and give both sets of documents (both contracts and appraisals) to underwriting and see what they say. Good luck.

All I suggest is that people check with their attorney (or an attorney) before writing up a contract like this. Someone who specializes in real estate laws in your State. Don't trust your realtor or mortgage lender to tell you if it's legal.

[Mike Peterson]

Originally Posted by magellan

Well thanks for your well wishes, but I still think it's "true fraud"

Well let me ask you, if an appraisal is always just based on the "market value", (as in your $10 example), then why does the appraiser always want a copy of the sales contract? Answer: because the most weight is given to the buyer/seller agreed upon price than on comps. Comps are only part of the equation. It doesn't matter if an appraiser is "licensed", they generally go by what is given to them in the form of the PA, and are usually not privy to the entire process.

One of the forms of mortgage fraud is "misrepresentation to make a buyer qualify who wouldn't normally qualify for the loan". In this case, the buyer couldn't qualify at the $370K price under his normal financial status, the price is jacked up from $370K to $400K, now the buyer qualifies because the extra $30K goes toward his down payment. He hasn't brought ANYTHING more to the table to increase his eligibility of the first contract. There are probably many cases of this happening, but as far as I know, it's illegal. If it's not illegal, then go ahead and give both sets of documents (both contracts and appraisals) to underwriting and see what they say. Good luck.

All I suggest is that people check with their attorney (or an attorney) before writing up a contract like this. Someone who specializes in real estate laws in your State. Don't trust your realtor or mortgage lender to tell you if it's legal.

It is perfectly legal for the seller to credit a certain amount back towards buyers closing costs. It is also perfectly legal to write an addendum to a contract raising the selling price with the seller crediting back to the buyer towards closing costs.

It is not illegal at all because it still has to appraise for the amount of the contract or loan amount.

[magellan]

Originally Posted by Mike Peterson

It is perfectly legal for the seller to credit a certain amount back towards buyers closing costs. It is also perfectly legal to write an addendum to a contract raising the selling price with the seller crediting back to the buyer towards closing costs.

It is not illegal at all because it still has to appraise for the amount of the contract or loan amount.

Just because a sales contract and an appraisal "match up" does not necessarily mean it's legal. Different states have different laws, but as far as I know, if the appraisal doesn't match up with the actual home value because it's being overinflated, then it's fraudulent. Do you give this addendum to the appraiser, or the mortgage underwriter?

If you can show me a link that says overstating a home's value for the purposes of receiving a buyer incentive (cash toward down payment, renovations, just because everyone is doing it, etc.) is legal, I'd love to see it.

[JimKing]

Originally Posted by magellan

Just because a sales contract and an appraisal "match up" does not necessarily mean it's legal. Different states have different laws, but as far as I know, if the appraisal doesn't match up with the actual home value because it's being overinflated, then it's fraudulent. Do you give this addendum to the appraiser, or the mortgage underwriter?

If you can show me a link that says overstating a home's value for the purposes of receiving a buyer incentive (cash toward down payment, renovations, just because everyone is doing it, etc.) is legal, I'd love to see it.

Realtors crack me up. So it is standard practice to inflate prices and give money back at closing. Or give other givebacks that don't show up in reported sold prices.

I own a fitness center and a chemical company....if I told my accountant that I wanted to inflate my sales figures and give kick backs, he would quit. And I am no lawyer, but I think I might be breaking a few laws if I did that.

[pslOldTimer]

Originally Posted by magellan

...Well let me ask you, if an appraisal is always just based on the "market value", (as in your $10 example), then why does the appraiser always want a copy of the sales contract? Answer: because the most weight is given to the buyer/seller agreed upon price than on comps. Comps are only part of the equation. It doesn't matter if an appraiser is "licensed", they generally go by what is given to them in the form of the PA, and are usually not privy to the entire process.

Not true. My son is a certified appraiser in Florida, has owned his own fee-based appraisal shop, and is now a regional manager of appraisers for a national savings bank that primarily uses staff appraisers. He is still required to perform all appraisals according to USPAP (The Uniform Standards of Professional Appraisal Practice).

Only lazy appraisers want to see a copy of the sales contract. How do you think appraisers arrive at a value when they are hired to do an independent appraisal? Any appraiser that follows "the most weight is given to the buyer/seller agreed upon price than on comps" is violating the rules. NO weight should be given to the buyer and seller's agreed upon price. There are too many variables involved in that price, including financing arrangements.

There are many ways to arrive at a value, including previous sales (comps), cost approach and income approach. Appraisers can, and do, use combinations of these methods when arriving at a value.

If an appraiser asks for a copy of the sales contract, it is merely for convenience -- if the sales price is coming in much lower than where the appraisal is leading, they can slack off a little and not be as exact.

Banks actually don't give a darn about the selling price; they want to know what the actual market value is, to see whether they are adequately protected by the equity in the house.

Any appraiser who actually uses the contract price to arrive at a value, let alone put more weight into it, should be reported to the state immediately.

[hiknapster]

Originally Posted by WOWAddict

Really only 2 things have changed from when we were booming. 1) Hurricanes 2) perception.

Wrong on the hurricanes. Right on the perception.

Hurricanes. The boom took off right after the 2004 hurricanes. Contractors declared supplies to be sky-high and prices took off. It didn't scare anyone off. It was almost like national hurricane reports somehow put Florida on the map. "Load up the kids Martha, there's been a hurricane in southwest Florida. We've got to live there!"

Perception. Right. Once the market ran out of suckers, the overinflated prices had no where to go but down.

[pslOldTimer]

As for this entire off-topic discussion of a seller offering incentives to a buyer, it has little to do with the appraisal. As long as the appraisal comes in high enough to provide the bank with their desired equity ratio, they're happy. The actual sales price has nothing to do with that.

The fraud that has been discussed is when a bank and an appraisal firm work in collusion to artificially inflate the value of a house so the bank can lend a higher amount. This always involves the sale of the mortgage on the secondary market, so some other financial institution gets stuck if the property has to be foreclosed, and the real value is not as high as the phony appraised value. Again, this has absolutely nothing to do with the sales price between the buyer and the seller.

Let me give a few examples. Say you have a residential property that appraises for $200,000 as market value. You can sell it for $150,000, $50,000, $1, of $1,500,000 if you like. Properties are bought and sold every day for more or less than the appraised value.

Buyers also get cash back at closings on a routine basis. If you are buying a property for the selling price of $100,000, and the bank is willing to loan you $150,000 because the appraisal comes in at $200,000, the closing papers will happily give you cash back of $50,000. Of course, you will have to pay it back as you pay the total mortgage of $150,000; the bank has not given you anything, they have loaned it to you based on the value of the house.

Now, let's look at the specific scenario in this thread. If you have a house that appraises for $200,000, but you have it listed for sale for $180,000 because no one is willing or able to pay the appraised value, there is absolutely nothi9ng stopping you from setting the sales price at $200,000 and giving the buyer $20,000 to pay for closing costs, moving expenses, remodeling, carpeting, painting or anything else. You have not defrauded anyone, because the total is still at or less than the appraised value.