Posted by JPiper on March 19, 2000 at 14:02:35:
The problem I refer to might arise as follows: Investor establishes a relationship with an appraiser. The appraiser provides free comps/market information to the investor. Later when the property is sold to an end buyer, the appraiser is used to establish value for the lender. This relationship between investor and appraiser exists over a number of months/years?.in which the appraiser works alternately for the lender and further for the benefit of the investor at the inception of the deal. A property is now sold in which the appraiser is hired by both the investor at the outset, and later by the lender to establish value for the bank and buyer. The buyer defaults fairly quickly after the origination of the loan (many times this is exactly when it happens?look at the foreclosure lists sometime). The bank forecloses, takes the property back, and loses money. An investigation ensues. (Many of these types of deals have been investigated in certain parts of the country.)
What is unearthed in this investigation is that the investor and appraiser have a business relationship extending over a period of time. The question then arises as to whether the appraiser and the investor were in cahoots to defraud the lender.
There is just enough smoke there that someone might ?assume? there is fire. You might well be able to justify your appraisal, there really might not be any wrongdoing, but the appearance is one that a relationship of some type did in fact exist. Where this might end up going is almost impossible to say. But frankly, that?s a road I wouldn?t want to be on. History is full of examples of innocent people whose lives have been significantly affected by investigations.
In my opinion, I would rather have absolutely no relationship with an appraiser as it applies to the end appraisal?.strictly arms-length. And my fear would be that dealing with an appraiser for other purposes on an ongoing basis would confuse that arms-length preference.
Call me cautious.