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Discussion Starter #1
Recently I read about new home sales and lender fraud. Apparently its not unheard of for a builder to work with a lender and jack the assessment by 3% or so. Some bank in Peoria lost a suit for this 2 years ago.

When I bought this god forsaken condo in 2002, I never saw an assessment. I didn't even know what an assessment was. I was a first time home-buyer. So I'm want to find out if there A) was an assessment and B) if it was accurate. (How do I go about this?) They also used government subsidies and first time buyer allowances for most buyers, but instead of showing the sale price and then showing the gift money as a separate line item, then simply deducted it from the sale price so it looks like we actually paid less than we did. I'm not sure this is legal or typical. Is it?

Is it worth while to pursue this? If so, what's the best thing to do, hire counsel? If the value was inflated by 3%, then thats approx $184,000 total for 128 properties. Approx $1,400/unit.
 

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Kristin said:
Recently I read about new home sales and lender fraud. Apparently its not unheard of for a builder to work with a lender and jack the assessment by 3% or so. Some bank in Peoria lost a suit for this 2 years ago.

When I bought this god forsaken condo in 2002, I never saw an assessment. I didn't even know what an assessment was. I was a first time home-buyer. So I'm want to find out if there A) was an assessment and B) if it was accurate. (How do I go about this?) They also used government subsidies and first time buyer allowances for most buyers, but instead of showing the sale price and then showing the gift money as a separate line item, then simply deducted it from the sale price so it looks like we actually paid less than we did. I'm not sure this is legal or typical. Is it?

Is it worth while to pursue this? If so, what's the best thing to do, hire counsel? If the value was inflated by 3%, then thats approx $184,000 total for 128 properties. Approx $1,400/unit.
Do you mean an appraisal? An assessment is usually what the county does when it values your property for tax purposes, and is not really relevant to a lender. Usually when you sell the property, it is reassessed by the county and the new assessment is the sale price. I'm not sure about they did the accounting, but if the builder recorded a lower sale price for you, that could be to your advantage, because your property taxes would be lower.

An appraisal is when a lender goes out and values your property based on similar recent home sales and other factors. If the builder is working with a lender, the lender was probably involved in setting the price, so an appraisal will only tell them what they already know. Since an appraisal costs money, they aren't going to do one. The appraisal should not be relevant to you, however. The price you pay is what YOU think the place is worth, not what the bank thinks it is worth. The bank can rig the appraisal, but that's a risky proposition. It means they are willing to loan more money for less collateral, and it can come back to bite them in a big way.
 

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Discussion Starter #3
Yes, meant appraisal

I have been told they are required by law. I just don't know how to find out if one was done on this property when the build sold them or not. I'm talking about investigating to find out if the builder and the lender worked together and jacked UP the sales price to gain a profit. Yes, this CAN bite the lender if there are lots of foreclosures--there have 3-4 at this property. But it probably won't.

The builder may have walking away with an additional $184,000 by altering the property value and selling to the unsuspecting/uninitiated home buyer. I paid the following:

86,500
+2,000 Options
-----------
88,500 Purchase Price
-2,500 Ameridream
======
86,000
-1,800 Down
======
84,200 Borrowed

4 years later the property is worth about $84,000 best guess. I know I could sell it for that. So that is a loss of $4,500 after 4 years. I believe that something really fishy happened here, and I'm wondering if the homeonwers have a legal avenue to pursue here against the builder.
 

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You should have all the loan documents and paperwork from when you bought the place. Go through each page and see what it says about the appraisal.
 

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might have helped

Kristin said:
I have been told they are required by law. I just don't know how to find out if one was done on this property when the build sold them or not. I'm talking about investigating to find out if the builder and the lender worked together and jacked UP the sales price to gain a profit. Yes, this CAN bite the lender if there are lots of foreclosures--there have 3-4 at this property. But it probably won't.

The builder may have walking away with an additional $184,000 by altering the property value and selling to the unsuspecting/uninitiated home buyer. I paid the following:

86,500
+2,000 Options
-----------
88,500 Purchase Price
-2,500 Ameridream
======
86,000
-1,800 Down
======
84,200 Borrowed

4 years later the property is worth about $84,000 best guess. I know I could sell it for that. So that is a loss of $4,500 after 4 years. I believe that something really fishy happened here, and I'm wondering if the homeonwers have a legal avenue to pursue here against the builder.
The appraisal doesn't set the price. You and the seller do. Regardless of an appraisal, you two can agree on anything you want.

Usually, the lender requires an appraisal to see what the property is worth, so that if there is a default on the loan, they want to know if they can get their money out of the property by selling it.

If you were just marginally qualified to buy, a higher appraisal might actually have helped you. If the bank will lend 80% (or whatever percentage up to maybe 95%) of the appraised value, then a higher appraisal will allow you to borrow more and more easily qualify.

Now, if the seller already had an appraisal, and then showed you that appraisal to induce you to buy, and that appraisal was jacked up and fraudulent, that's something different.

I doubt you'll get far with this.
 

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Discussion Starter #6
Thanks

Thats what I figured, but I thought I'd check. This is where we get the saying, "Buyer Beware." Kristin
 

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FWIW, you always need to have an attorney of your choice representing you on a house purchase. Always. Everybody else will have an attorney.....
 

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Dave_Stohler said:
FWIW, you always need to have an attorney of your choice representing you on a house purchase. Always. Everybody else will have an attorney.....
agree--the amount of legaese involved in buying a house these days is astounding.
 

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Dave_Stohler said:
FWIW, you always need to have an attorney of your choice representing you on a house purchase. Always. Everybody else will have an attorney.....
Funny... I do transactional work and frequently help lenders and buyers negotiate terms on pretty big commercial property deals. Another guy in my office and I were talking and both agreed that residential loan docs are barely worth reading. Not because there isn't loads of important stuff in there, but because they are basically non-negotiable. It's not like I can send back a redline of my residential deed of trust and expect anything but a big laugh out of my lender. It's almost like trying to markup your Visa agreement. It just won't happen.

That said, it's the purchase agreement where you need to know what you are signing, and those, even in the residential setting, frequently are negotiable. The rare instance where a seller won't negotiate is where you are buying from a builder in a big new development. On the other end of the spectrum, purchase agreements are always negotiable when purchasing from an individual owner (whether the seller realizes it or not).
 

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Prosecutions

Appraisers and lawyers are being prosecuted here in SC over this very issue. I think they are getting them for RESPA and Truth-in-lending violations, and mail fraud. The heat is coming from the lenders, who get stuck with inadequate collateral after the borrower defaults.

http://www.mortgagefraud.squarespac...rney-pleads-guilty-in-mortgage-loan-scam.html

If one can prove they relied on the inflated appraisal (most deals are contingent on financing, which requires an appraisal) in closing the deal, there might be a case.

soup

edit: I meant to reply to Kristin's original post
 
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