Appraisals...an inside look at 'The OC'
Why am I bringing this up? Because there is a lot of good information on this blog and in the comments posted by readers of this (and other) blogs. Sometimes you have to look beyond the major news headlines to see what is 'really' going on. Like I have said before...the media is a lagging indicator.
I want to share some information from an Appraiser that specializes in the Orange County area. This persons comments were buried way down in the comments on another thread, but I think they deserve to be read by more people.
Sometimes you can get a better picture of what is going on by listening to a few quiet voices that are whispering solid information against the background of an industry that is screaming "EVERYTHING IS FINE!" at the top of their lungs.
Here are the first comments from an OC Appraiser:
As an ethical, professional appraiser in OC, I can tell you all that YES, I have been checking the declining values box when the market warrants such an action. I am doing many more foreclosures now than ever before. I just did one in Trabuco Cyn (Wagon Wheel). There are 4 REO’s alone within the same development, and a couple actives that were purchased in 2005 for more. Kind-of eary driving around. Nice cars in the drive-ways, with “bank-owned” for sale signs in the lawns. How could this happen in South Orange County???
Looking at public data indicates no shortage of “underwater” borrowers in this area (Wagon Wheel Cyn). To make matters worse, the last contract (pending) was signed 3 months ago. This, in a market that usually sees 2-3 contracts (sales) per month.
Yes, the sky appears to be falling in this sub-market. The scary part is that I see the same thing across most of OC.
I have not seen a market with “valid” price increases in over 10 months. I’ve been doing foreclosures from the Santa Ana markets, to the higher end Coto Markets, and all areas in between (Mission Viejo, Laguna Niguel, Dana Point). Not seeing so much REO work in the high end $3M+ markets, as those buyers have appeared to be more well healed. A lot of REO work in the $1-2M range, where I suspect it was move-up buyers biting off way more that they could chew, especially in the way of higher property taxes. Be careful you guys, there is still a lot of fraud and it seems to be picking up. I get several call a week now from local brokers asking me to pump values, as they go down their list of appraisers in a given area. Sad part is, they always find someone willing to commit fraud. No shortage of appraisers in OC that is for sure. And since most are really new, they dont know what they dont know. So they actually think they are giving their clients “good customer service”, when they phish for comps to hit a predetermined value. Just be careful out there.
The OC real estate market is currently in decline and the mommentum appears to be shifting into high gear.
At least from my vantage point.
So that this second comment by the same OC Appraiser makes sense, another poster asked for more specifics regarding some of the areas talked about. The Appraiser could not give specifics because of confidentiality reasons. But here is some more information:
Thats correct, enforcement is lacking, and its just too damn easy to make money as a crook in the real estate business. The thing I dont understand is why someone would be willing to commit a federal offense for a measly $350.00 I guess it goes to show you that the many appraisers in California and namely OC arent very bright, and are just looking for the easiest way to make money, with the least amount of effort. How hard is it really to find a slimmy broker in OC? They are practically on every corner. All the appraiser has to do is knock on the door with a smile and a wink to be assured a steady stream of business. I’ll be interested to see how long these relationships last with the fraud investigations starting to gain traction. In Colorado and N. Carolina, appraisers are going to Federal Prison, just for being stupid. One trainee even tried to plead ignorance. Sorry, up the river you go. Now we just need the wave to hit California and they should be running scared. Hopefully they will go back to working at Del Taco, or whatever else these sorry bunch of characters did before they got their appraisers license.
On the REO side: In WW, they are located on Charokee, Raindance, and Longhorn. For confidentiality purposes, I did not include the street name of the appraisal I did as a pre-foreclosure. Some of these are already bank owned, and others are just active for less than original sales price.
I would not offer list price in this environment. A prudent buyer will attempt to take advantage of a sellers desperation. Afterall, like I said, not one buyer has been willing to sign on the dotted line in the area in 3 months. If that is not a RED flag, I dont know what is. Do your research!! Oh yea, Coto REO’s: Look in the “Tanglewood” tract, streets: Charleston Ln, Raleigh Ct, and Westchester Ct. There are some folks underwater in there, as well as many other area of Coto. I could list these all day long, they are all over OC.
Maybe later I’ll come back and give you guys some from some coastal communites. Hot tip: if you have access to public data or the local mls, you can see when someone bought something, for how much, and best of all, how many times have they refied and for how much and when. This is the key. Find someone who is totally underwater, and there is a good chance it will be an REO at some point. Find multiples in certain neighborhood, and you will be well served to hold out for the firesale that will soon follow, as the banks will all dump these at the same time. In my opinion, right now is too soon to get anything at a “percieved” discount, for more will follow.
Good luck, and watch you backs. Dont trust anyone you dont go out and hire yourself. And even then, be careful.
Here is some more information that OC Appraiser shared with me via e-mail:
I think it is important to at least inform the public about the shadiness of the business. I think about how much business I have lost over the years due to my integrity and how my good name has been tarnished amoung people I thought were my friends, who work as mortgage brokers, and its real sad. The public needs to know that when mortgage brokers refer to an appraiser as a "good" appraiser, its because the appraiser has a reputation for making the deals work, all the time, without regard to a property's true market value. This is fraud.
"Deal killers" are appraisers who go out and do their job, which is to collect data, analyze, and form an opinion without bias. The appraisal is to help protect the lender against losses. Problem is, brokers arent lenders, and many lenders today sell their loans, so they really dont care about the quality of the appraisal either. They all get paid when they sell the loan down the chain. Its like a big pyramid scheme, with the debt holder (borrower) as the stooge holding the bag. Not a problem when your house is going up 20% per year, but take that away, and you are in serious trouble. I think the overall mentality of a person having debt needs to change, and it typically does throughout market cycles.
In my opinion there are 2 kinds of debt: Bad debt, and worse debt. Lets take a typical senerio I run into all the time: Home is purchased by local area agent. Its fixed up, listed way above market value. The same agent brings in a buyer, uses the "in-house", or "favorite" lender/broker shop, who has a list of "good" appraisers. Agent pushes the house on a buyer as a "great deal", and claims to have "access to lenders", funding will be "no problem". Take away the shady appraiser and this deal is dead in the water. But there is too much money at steak to let this deal die. Its much easier to find a "skippy" appraiser, pay him $400 bucks to sign the appraisal report with the predetermined number and collect the commission check. If you refi your house, the broker will usually ask you what you think your house in worth. They draw up the papers using this number, and find an appraiser who will "get" this number. 9 times out of 10, the appraisal will come back at exactly that number. Its a miracle!!
The public needs to not be fooled. These people are not your friends. Sure they may appear to be getting you out of a jam, but in reality are digging you in deeper, and screwing you because now the asset that you "own" is worth less than what you owe the bank. Try selling your house now. It wont happen. You will eventually be in foreclosure and probably bankrupt, while your so called "friends" are off closing more deals. Folks need to take control and do their own research first before allowing these "snakes" in the door. I know its difficult for most folks, but I think for the sake of your future, and that of your family, you need to get educated. Do your own research! And if it sounds to good to be true, it most certainly is.
So, you have heard me mention appraisal fraud along with some of the other types of fraud that are being committed in the mortgage industry. Here is an actual appraiser that has been in the business for a while telling you their side of the story and what they see on a daily basis. Now is where you have to ask yourself, should I belive this information even though it is not being told by the major media outlets or the real estate experts? ...yet
Use this site as one of the tools to help you make an informed decision. Remember...2007 is the year when things will really start to get interesting. It takes time for all of the creative financing, fraud, and people living maxxxed out beyond their means to take its toll on things and work its way through the system in a way that is finally reflected by decreasing home prices.