After six years of appraising in Mexico I’ve seen the following patterns that warn me when I am being deceived.
1. My favorite one is when the loan applicant’s representatives take me to a prime location and then point to their property in the distance. “There it is,” they tell me. I tell them that my client requires me to set foot on the property, which is not really true (setting foot on the property is my requirement), but wouldn’t I look foolish and my client be harmed if I didn’t know find out that the land is a mangrove swamp? Sometimes it’s hard to tell from above, as can be seen in the following photos from Isla Mujeres:
2. Another pattern is when excuses are made as to why I cannot meet the property’s true owner. A common response is “We have power of attorney; it doesn’t matter,” but the document supposedly conveying the power of attorney is not convincing, either that is excessively old, it conveys power to yet another individual who is not present, or it does not actually convey power of attorney and the loan applicants are just hoping that I can’t read Spanish. Some feel compelled to provide a photocopy of the owner’s driver’s license or passport, hardly a standard of proof.
3. The borrower’s representatives all have business cards labeling them as marketing or public relations consultants, yet they claim to be real estate developers. “Show me your development plan” is a good question to flush out fake real estate developers.
4. When I request a current predial (property tax bill) for the property, deceivers instead supply a predial from years before. Years 2008 and 1993 are favorite years. Year 2008 is the year before Mexican tourist land values started crashing. Year 1993 was the year that the peso was devalued by 1000:1, so every assessed value appears 1000 times larger than it actually was. The inability to obtain a current predial might also indicate that the borrowers do not actually currently represent the true land owner.
On a related note, Citibank announced in February fraud-related losses in Mexico of $400 million in their Banamex subsidiary and has also experienced hundreds of millions of dollars in losses in previous years in ill-fated Mexican residential subdivisions. In 2011, I pitched my own Latin American appraisal services to their chief appraiser for Latin America, who is actually a gringo in Atlanta. I was then told that I cannot serve Citibank because I am "not a national firm", even though the first three years of my career were spent at international firm Jones Lang Wootton, now JLL.
Next year, a client hired me to appraise a proposed residential subdivision outside Mexico City and also hired the local Cushman and Wakefield Valuation and Advisory Services office in Mexico City. C&W came up with an appraised value 15 times as high as mine and the client got us on a 3-way conference call to resolve this discrepancy. The C&W appraiser was a young girl right out of college. I noted that her report had incorrect zoning for the site. She said that she did that because the broker told her to, but there was no documentation that a change in zoning was occurring and the neighboring subdivision had only been able to sell less than 20 lots. My client told her "Don't assume anything".
Perhaps Citibank's insistence on using "national firms" is what has caused them so many losses in Mexico? Perhaps this also explains why Cushman is facing over $10 billion in appraisal malpractice claims.