Real Estate News

Office Of Real Estate Appraisers Cracks Down On Unethical Behavior Of Real Estate Appraisers

The first case involved an accusation of performing appraisals in a series of transactions in which Mr. Thomas E. Williams, of Riverside, was alleged to have significantly overvalued four residential properties located in Riverside County using comparable sales he falsely reported. These fraudulent transactions involved properties that sold at reasonable market values through normal marketing processes. The sales prices were then greatly inflated to more than twice the actual sales price during the escrow process, allowing the buyers the means to skim loan proceeds far above the current market values of the properties. This is a variation of a "flip" transaction that occurs when a party pays the "going price" for a property and then immediately sells or transfers the property to another party at a greatly exaggerated price. Typically, the property is appraised at the exaggerated price, a large loan is made based on that appraisal, and the seller walks away with the funds.

Mr. Williams' license was revoked. He also was required to pay a $10,000 fine and over $6,000 in enforcement costs. This case was referred to the District Attorney and federal law enforcement agencies for possible criminal prosecution.

The other case involved numerous serious violations of USPAP. Troy Olson, of North Hollywood, was found to have prepared appraisal reports that contained ethical, competency, and technical USPAP violations. Mr. Olson deliberately submitted appraisal reports that grossly overvalued properties. The reports included photographs of superior properties in an attempt to conceal the overvaluations and support higher values of the subject properties. OREA adopted the decision of an Administrative Law Judge to revoke Mr. Olson's real estate appraiser's license.

These are two examples of a growing number of cases involving real estate schemes, such as those recently reported in New Jersey and Florida, as well as in California.

OREA continues to work closely with law enforcement agencies throughout the state to aggressively pursue unethical appraisers. According to OREA's Acting Director Jerry R. Jolly, "Cases like this continue to underscore the importance of appraiser licensing and regulation, which resulted from the Savings and Loan crises of the 1980's. As real estate values continue to soar, so does the potential for profit in real estate schemes. Clearly, we see that financial institutions remain at risk today, which is one of the reasons why OREA takes cases such as these very seriously. Anyone with questions or concerns about an appraiser's activities is encouraged to contact OREA and, if appropriate, file a complaint."
 

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	Did You Know?
	Three theories exist regarding who has legal title to a mortgaged property Under the title theory title to the security interest rests with the mortgagee. Most states, however, follow the lien theory under which the legal title remains with the mortgagor unless there is foreclosure. Finally, the intermediate theory applies the lien theory until there is a default on the mortgage whereupon the title theory applies.