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July, 2006 Blog

Forensic Appraisal Aurora Colorado

by:  Philip G Rice, Certified Residential Appraiser, CPA, MBA

House Pic

07/31/06

$70,000 Mortgage Fraud

10695 Rowland Ave, Littleton, CO  80127

Comments:  The MLS listing says this property is priced below market value.  This is an interesting comment because the person who wrote it is an appraiser.  After 187 days on market, any idiot can see the value is not even $365,000.  2 real estate agents, the buyer/borrower, a mortgage broker, appraiser, and a lender all knew what needed to be done - and each did their part.  Long Beach sold this mortgage to a sucker.

tags

real+estate Henry+Wilmot Kimberly+White Washington+Mutual susan+heitmann

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MKG Appraisal  FoaF,  OPML, RSS Feed, Business Card - scanned image, vCard file.

House Pic

07/30/06

Jonathon Wells

3162 S Emerson St, Englewood, CO  80113

Comments:  The numbers don't fit together right.  Kirk Blackard (the listing agent) reported a $300,000 contract price with a $47,000 cash rebate.  There is "only" $270,000 recorded for the mortgage amount.  Jonathon Wells bought the property in January, fixed it up and put it back on the market.  No luck trying to sell this property at $370,000.

Jonathon Wells recently purchased 2 other properties - 640 Brentwood St in Lakewood and 3910 Jason St in Denver.  The Jason St property listing history is up then down and then up again, with no sale reported.  Public records shows a sale of $130,000 in February 2006.

There may be a reasonable explanation for all this, and it may turn out fine.  Don't worry, be happy.

House Pic

07/28/06

James R Beauprez - Part 3

Weekend Golf Getaway

I could be wrong, but I believe Jim Beauprez is the son of US Congressman Bob Beauprez, currently the Republican candidate for Governor of Colorado.  Today's blog item is about a property located in Castle Pines, at:

8104 Briar Ridge Dr, Castle Rock, CO  80108

Comments:  Kimberly White is an original member of the Dream Team.  What could possibly go wrong on this transaction?

Comment from Dave Lister 7/29/06:

Not only are you correct about James. R. Beauprez being Bob Beauprez's son, but take a look at this little tidbit from a back issue of the Rocky Mountain News:

Jim Beauprez was named vice president/managing officer of the Heritage Bank Mortgage Division

It seems that James/Jim Beauprez has some experience with mortgages from his time at Pappy's bank.

Condo Pic

07/27/06

James R Beauprez - The Pad

I could be wrong, but I believe this is the son of US Congressman Bob Beauprez, currently the Republican candidate for Governor of Colorado.  I posted about the house Jim bought on 18th Street - blog entry dated 04/13/06.  This property is a condo located at:

1375 E 17th Ave #3, Denver, CO  80218

  • Google Map
  • Purchase Date = 06/13/06
  • Price Paid to Seller = $254,200
  • Loan Amount = $203,360 (2nd mortgage unknown)
  • Lender = American Brokers Conduit, a subsidiary of AHM
  • MLS pg1
  • MLS pg2
  • Deeds Report
  • Indicated Fraud = $ Unknown, maybe none.
  • Listing Agent = Julie Hummel - Kentwood at Cherry Creek
  • Selling Office = 08435 = Kentwood at Cherry Creek

Comments:  Julie Hummel got a round trip - collected a commission on both sides of this transaction.  Jim Beauprez obtained a $200,000 loan with an interest rate of 1.4%.  This property sold for $220,000 in 2004 after an extended (about 400 days) marketing period.  IMHO the Denver real estate market has been flat since mid 2002, which means this property is likely worth about $220 unless there was some significant improvements to the property.  I say good luck if you need to sell for anything over $200 - be patient it may take a year or 2.  Also IMHO, there is a 2nd mortgage of 20% that does not show up in the public record.  I don't believe Jim Beauprez made a $50,000 down payment.  Do you?

Fun with vocabulary:  List of "media" words that never get used in real life:

  1. Hip
  2. Groovy
  3. On the Lam
  4. Pad

The word Pad is defined as "the room, apartment, etc. where one lives".

07/26/06

Working RE Magazine

There is an article about me in the current (summer 2006) issue of Working RE Magazine.  I received about 20 comments and decided to post them.

My comment:  Everyone has their own point of view.  If you take the time to read all the comments, it gives some insight on the way things are.  (Nearly) Everyone agrees there is a problem.  Very few are willing to do anything about it.

07/14/06

4 Down

Local appraisers who recently lost their license.

BOREA took 4 Licenses - which is more than the previous 3 years combined.  An important step in the right direction.  Is it enough?  Is it too little, too late?  Are there more in the pipeline?  Time will tell.

07/12/06

Secresha Cooper

Notes:  Secresha bought 2 houses on April 28th.  5/12/06 is the 3rd recent purchase I know of.  There could be more in the pipeline.

07/11/06

Secresha Cooper

Notes:  Secresha bought 2 houses on 4/28/06.  Buy one house in the morning, break for lunch, then come back and buy another in the afternoon.

This is an update on a property featured in the March Blog.  Don't worry be happy.

The lead story on the Business Page of the Denver Post - 07/11/06 - Headline is "Foreclosures still surging", by Aldo Svaldi.  Arapahoe County foreclosures up 36% over last year.  Last year was a big year.  I see a mortgage system that is badly broken, and it just keeps doing the same thing.

This is a fine example of the status quo.  Everyone involved in this transaction knew what needed to be done, and they each did their part.  A local appraiser produced a report to justify a $356,500 loan.

07/10/06

Secresha Cooper

Notes:  Secresha could be a Vicki Dillard Crowe wanna-be.  This is 1 of 3 houses bought by Secresha on a recent mini shopping spree.  Are there more in the pipeline?

07/09/06

John Bivins

House Pic

15693 E Chenango Ave, Aurora, CO  80015

Notes:  $500,000 loan on a $400,000 house.  The selling agent (John Bivins) has a criminal record for "theft of government monies".  What could possibly go wrong?

tags

real+estate John+Bivins New+Century Katherine+Anderson Kisha+McBride

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07/07/06

This item dated March 28th, 2006, posted here.  This was sent to Mark Kohn at BOREA.  The original post included a case study of 5 detailed examples from appraisal reports produced by Elizabeth Butler.  Recently updated with another detailed example from an appraisal done by James Esters - and it's a dilly.  If you are interested in the details, refer back to the original via the link in the first sentence of this paragraph.

Neighborhood $ Values Pulled From Air

Analysis, Commentary, Summary:

The ethical appraiser runs a CMA report (competitive market analysis) at the beginning of the appraisal assignment.  The CMA market data is entered on page 1 of the URAR - neighborhood sales values - high, low, and predominant.  The CMA is a standard report used by (nearly) every real estate agent and (nearly) every appraiser in Denver and all over the country.  For the ethical appraiser, the subject property will sometimes be equal or close to the neighborhood predominant value, sometimes higher and sometimes lower.  The number of times higher is about the same as the number of times lower.

For some unethical appraisers the appraised value is always equal to the neighborhood predominant value.  For these unethical appraisers, the number of times the appraised value is higher than the predominant value is near zero - it (more or less) never happens.  This may sound far fetched, but people who review appraisals and are paying attention know this happens way too often to be a coincidence.

Every neighborhood has a range of values, and something has to be at the top of the range.  But for some unethical appraisers, they never seem to appraise anything that is higher than predominant.  How many times do you think Elizabeth Butler has ever appraised a property that was valued higher than the predominant neighborhood value?  If you randomly selected 100 of her appraisals during 2003 and 2004, how many would you expect to show an appraised value higher than the predominant neighborhood value?

Elizabeth Butler says I am not clairvoyant - but how about this - I say you can pick any 100 recent appraisals she has done and you will find 0 (zero) with an appraised value higher than the predominant neighborhood value.

Why do (some) appraisers do this?  The real answer to this question is - what difference does it make?  It's unethical.  But regardless of their story (in this business everyone has a story), it makes the subject property look "normal", and therefore a safer lending risk.

If predominant neighborhood value must be equal to (or greater than) appraised value, it means (by definition)  the final opinion of value will always be determined before the neighborhood predominate value.  In other words, start with the final opinion of value, then work backwards and selectively find data to support it.  If necessary - fabricate the data - make up the numbers - do what ever is necessary to make the subject property look "loan worthy".  The top priority = allow the loan to close.

Is it true that an Elizabeth Butler appraisal will always show the predominant neighborhood value equal to (or greater than) the appraised value?  If this is true, it does not mean every appraisal is wrong.  But it does mean Elizabeth Butler has consistently violated the ethics provision of USPAP - because Elizabeth Butler is/was not independent, not impartial, and not objective.

For those who are offended or upset by the above paragraph - I urge you to read the disclaimer.  The above paragraph prominently features the word "if" - and it is a big if.  And finally, it is my opinion that ethics (or lack thereof) is a human characteristic - there is no such thing as an ethical tree, ethical rock, or unethical report.  In my opinion, the appraisal industry is facing an important issue (crisis) of ethics, and the industry needs to get their collective head out of the sand and deal with the ethics of the people who produce the reports.

Elizabeth Butler says she gets market data from the sold books.  If we accept this at face value, it means she was not using the computer generated CMA report.  In my opinion, there is nothing inherently wrong with using the sold books, sun dial, horse and buggy, abacus, or any other "old fashioned" technology.  This is not a technology issue.  The real issue is about:  independent, objective, impartial.  If she was/is estimating the neighborhood values in an independent, objective, and impartial manner, the end result would reflect something like an even split between above and below predominant.  In the case of Elizabeth Butler and many others just like her, there is nothing "even" or "random" or independent or objective or impartial about the end result.  Outdated technology is not an excuse for unethical work product.

What about ignorance?  The accused appraiser always says  "I used to be an idiot but now I'm not".  They  never admit to being unethical.  In this case, they act dumb and maybe tell a convincing story about not understanding the definition of "predominant".  Everyone has a story.

To those who argue that the neighborhood predominant value is not the most important thing on an appraisal report:

I agree it's not the most important thing - but it's not the least important thing either.  Neighborhood values do matter.  But to the point - what is the most important thing?  The answer (of course) is the final opinion of value - the "bottom line" is the most important thing on the appraisal report.  And what happens if the most important thing is "wrong"?  Then what?

James Esters - Colorado real estate appraiser license number AL40033702.  Appraisal fraud, appraisal report on 670 Pearl St, dated May 24th, 2006.  Stipulation and final agency order which is a discipline document issued by the Colorado Board of Real Estate Appraisers - BOREA.  Esters OPML file and  OPML tags and keywords.

Blog Entry dated 07/06/06

This item dated March 28th, 2006, posted here.

Appraiser Ethics Violations

Dear Mark Kohn

This is my response to your request(s) for specifics and additional information.

I filed 20 complaints against 15 appraisers in September of 2005.  As I prepared these complaints, I faced many choices about what to leave in and what to leave out.  Each of my complaints could have been 20 pages long.

In general, I assumed the reader of my complaint would know the basics of the mortgage industry, the basics of the appraisal industry, and have a good (detailed?) understanding of the appraisal rules (USPAP) both in theory and in practice.  As a practical matter, the investigator, prosecuting attorney, and ultimately the administrative law judge have likely never prepared an appraisal report.

In processing an appraisal complaint, it is critical that everyone understand what a “seller concession” is, how the seller concession affects the home buying process, how it affects the mortgage, and how it affects the role of the appraiser.

In any purchase transaction, the single most compelling piece of market data is the dollar amount paid by the buyer to the seller.  In today’s market (in Denver), over 50% of all purchase transactions involve a seller concession. For 100% of these transactions, the contract price is an artificial (contrived, hocus pocus) number that exists for the sole purpose of asking the appraiser to help “sell” a loan amount higher than the amount paid to the seller.

In plain non-technical language:

USPAP says an appraiser must be 2 things:

  1. Ethical, AND
  2. Competent

IMHO, an appraiser must:

  1. know the real estate market, AND
  2. tell the truth

An ethical appraiser sets out to answer the question:  What will the house sell for (“most probable price...”) ?

An unethical appraiser sets out to produce a report to be used to sell the loan package to an investor.

note 1 – see detailed example of how an unethical appraiser builds selective data to support a predetermined value.

Looking at the “big picture” – Denver appraisal problems are generally not about competence and technical issues.  Metro area appraisers consistently demonstrate all the skills necessary to produce an appraisal report that will allow the loan to close. (note 2)  Nearly all appraisal problems are a failure of ethics.

I have observed -- given a specific appraisal report, the discussion is always about technical issues (competence) and never about ethics.  There is a widespread belief that it’s necessary to be a mind reader to “know” an ethics violation has occurred (see clairvoyant).  Nothing could be further from the truth.  It is necessary to read the report.

Every appraisal assignment involves choices about what to put in the appraisal report, and what to leave out.  I have no desire to make a stink about typos and technicalities.  However, if the appraisal report fails to mention the contract price is $10,000 more than the asking price, this is a failure to tell the truth.  It is a violation of the USPAP ethics rule.  Nearly all of my 20 complaints involves some variation on this theme.

And to be clear, simply disclosing the concession and the asking price is not enough.  USPAP says the appraiser cannot ignore the “agreed amount”.  USPAP AO1 says "the appraiser must take into account all pending and recent sales of the subject property itself".

It’s not up to me to provide analysis, explanation, supporting documentation, or any other kind of evidence or “proof” of a conspiracy.  It’s up to the appraiser to justify, explain, analyze, theorize, hypothesize, etc, how the market value can be different than the agreed amount.  There needs to be some kind of plausible explanation of how the appraised value reconciles with the compelling market data to the contrary.  The evidence of the ethics violation is in the report.  Specifically, the ethics violation is what got left out of the report.  It's an error of omission.

When the appraisal report hits the requested number, and offers nothing in the way of analysis or explanation, it constitutes a serious violation of the USPAP ethics rule.  It goes to the very core of why the appraisal profession exists.

07/05/06

Absorption

Aurora South (AUS ) Residential (houses) - 3,821 sales in the past 12 months = 318.42 per month.  1,965 active listings = 6.17 month supply.  Condos (including townhouse) - 1,614 sales in the past 12 months = 134.50 per month.  1,303 active listings = 9.69 month supply.  CMA 07/04/06 - residential / condo.

In plain English - if you are trying to sell a house in Aurora, it's going to take 6 months.  If you want/need to sell in less than 6 months, it better be priced aggressively and/or you better have a good real estate agent.  For a condo, it will take 10 months.  If you're in a hurry to sell a condo or townhouse -- good luck.

Compare these numbers to a post from 2 weeks ago.  Overall market activity is slowing just a little bit - fewer listings and few sales in the past 12 months.  The rate of absorption on houses went from 6.14 months to 6.17 - not much change but moving in the "wrong" direction.  Condos moved the other way - from 9.85 months to 9.69 - a small move.  If you have a condo to sell it's still a bad number, but it's moving in the "right" direction. 

If you are a real estate agent, you should be nervous because fewer listings and fewer sales = fewer commissions.

Web 2.0 Comment Policy:  Comments and questions are welcome and encouraged.  To add your comment, send an email.  I will post all comments unless you ask me not to, or unless the comment is way out of bounds.

07/04/06

Leslie Rousseau

Effective June 30, 2006, Leslie Rousseau surrendered his appraisal license.  In addition to a " long history" of disciplinary problems with BOREA, Mr. Rousseau had problems of a criminal nature.  As stated in the STIPULATION FOR SURRENDER OF LICENSE AND FINAL AGENCY ORDER:

  • Around December 2004, Leslie Rousseau ("Respondent") filed an application to renew his appraiser's license.  Upon request by the Board, Respondent was unable to provide proof that he completed all 42 hours of required continuing education.
  • On or about November 21, 2005, Respondent entered a guilty plea to a federal misdemeanor in the U.S. District Court for the District of Colorado, criminal case number 04-CR-463-S2-MK. On that same date, Respondent was sentenced to three years on probation, required to pay $19,200.00 in restitution to HUD and required to pay various fees.
  • The facts pertaining to the criminal conviction as detailed in the Plea Agreement are as follows:
    • During or around February 2000 Respondent sought to purchase a home.
    • In an effort to secure a loan for the purchase of a home located at 1100 S. Moline, Aurora, Colorado, Respondent submitted a mortgage loan application containing materially false information including a false social security number, false W-2 forms and false pay stubs.
    • Respondent paid money to a third-party to provide him with the false social security number, the false W-2 forms and the false pay stubs.
    • During or around April 2000, Respondent advised and encouraged another to utilize the services of the third party that had provided Respondent the false social security number, the false W-2 forms and the false pay stubs.

My comments:  The good news  - one less dishonest appraiser in the Colorado market.  Now we know what it takes to lose an appraisal license.  It is possible, it can happen.  I think it's too little and too late.  But give credit where credit is due:  this is an important step in the right direction.  Will the Denver area appraisal community take notice and clean up their collective act?

Did the Plea Agreement in Federal Court name names?  What is the name of the "third party" who provided the false social security number?  What is the name of the "another" person that Leslie encouraged to utilize the services of the third party?  If the social security number seller is a "third party", who is the second party?  Does that make the "another" a fourth party?  Why not name names?

Leslie Rousseau agrees the disciplinary action is "just and appropriate".  How do I know this?  He signed his name to a document that says so - specifically:

The Board further finds and concludes, and Respondent agrees, that based upon Respondent's above-described violations of Colorado appraisal law and Respondent's disciplinary history, the following disciplinary action is just and appropriate under the circumstances:

I am struck by the similarity of the quote from Jim Esters, who signed his name to an appraisal report with this statement:

The subjects estimated value of $730,000 is very reasonable and just.

Appropriate - Reasonable - Just ???

Any questions?

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