Monday, October 8, 2012

Ecuador Revisited


The property north of Quito, near 10,000 feet above sea level

My previous Ecuadorian land appraisal reports [see July] were not favorably received by the loan applicant when I valued the two properties as the marginal agricultural land that they were. Besides, this loan applicant had not even received solar farm licenses yet nor had purchased the parcels or presented purchase contracts. The rebuttal was that Ecuadorian land was much more valuable than California solar farm land that I was used to appraising, a concept that sounds somewhat silly since I receive International Living and Pathfinder Alert e-mails every week declaring Ecuador to be the ultimate real estate bargain.
The farm in Guayas. The unique trees are called "ceibos".

The developer pointed out the massive profits to be made in solar farming – so profitable, in fact, that the location or choice of land did not matter to him.  This rebuttal proved counterproductive to his wishes, as my client is a collateral lender who was being offered only the land as collateral for their loans.  There were no solar farm improvements on these parcels, nor were there solar farm licenses. 
 
If 99% of the value of a solar farm is in the improvements, then very little of value was being pledged as collateral for the loans, leaving the loan almost unsecured prior to the receipt of solar development licenses and their subsequent development.  This is not a desirable position for a lender to be in, and is particularly unacceptable to a collateral lender.
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Sunday, September 30, 2012

Appraisals for Chinese divorce in California

    Beijing night market, September 2011

This blog has attracted inquiries from two separate California divorce attorneys who share a similar problem – what happens when Chinese couples divorce in the state of California and the marital assets must be divided 50-50, but those marital assets include residences in the People’s Republic of China?

 They need residential appraisal reports, but the reports must be in the English language and be literate enough to be submitted to a court of law.  Finding an English-literate Chinese residential appraiser is easier said than done, but to be fair, the Chinese have done a much better job learning English than Americans have done in learning Chinese. 

 When I have searched the directories of international appraisal organizations, I find the Chinese members to be sophisticated commercial real estate appraisers who appraise corporate assets, but who does one turn to for a simple condo apartment appraisal?

 China Daily News has reported that there are about 550 appraisal companies in China, but finding one is a challenge in itself.  The most recent request I received was for the valuation of 4 apartments, three in Beijing’s ChaoYang District, in central Beijing, and one in the ShanDong province halfway between Beijing and Shanghai. 

 I contacted several Beijing appraisers listed in the Appraisal Institute directory but got only one response – with a price quote of 30,000 Chinese Yuan, or about $4750, which shattered my “everything is cheaper in Chinatown” way of thinking. The sample appraisal reports from the firm also showed how appraisal jargon can get lost in translation. For instance, what we call “comparables” were instead labeled as “contemporaries”.


While pondering this issue, I was contacted by my friend Ian Ng, the chief appraiser for the Hong Kong appraisal firm of Ascent Partners, who is about to embark on a U.S. business development tour.  I have collaborated with them before on corporate asset valuations and already knew of their ability to write lucid English-language appraisal reports, and he told me that they had the ability to handle such an assignment at a fairer price. 


The divorce attorney was pleased, but he also explained that the inherently emotional nature of divorce often leads to frequent starts and stops. In the mean time, I am willing to hear from any other Beijing or Shanghai residential appraisers.

And for Chinese husbands, treat your wives well.  Remember -- they get half.
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Tuesday, September 4, 2012

Appraisal of a 1700-acre ranch in Belize


I sometimes encounter misperceptions about the effect on land value when a property is divided into two parts. In this instance, a ranch of several thousand acres of mahogany, rosewood and cedar in Belize had been appraised for $45 million in 2006 for a wealthy landowner. Then he died, and the ranch was split between heirs into western and eastern portions. I was to appraise the eastern portion.

Per the map, the western portion was accessible via the Northern Highway leading from Belize City to Orange Walk, and the eastern portion was accessible via the Old Northern Highway, 2 miles east of the Northern Highway. The property to be appraised was the eastern portion, and the mortgage broker must have assumed that values had remained unchanged from 2006 and that eastern and western parts were similar in value.

When I arrived in Belize I was surprised to find out that the Old Northern Highway serving as the western boundary of the eastern ranch had been dismantled back in the 1970s by the UK government because it was being used by Colombian drug smugglers as a landing strip. The subject property, two miles east of the Northern Highway, could only be accessed by tractor due to brush and topography (including wetlands).


To make matters worse, most of the valuable timber had been stolen, a common problem in Belize.

In the end, the value of the property, which had been represented as a seven-figure number, was appraised as a six-figure number.

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Tuesday, August 28, 2012

Appraisal of a vacation club timeshare in Thailand

This blog occasionally attracts inquiries from owners of foreign vacation timeshares.  They want their foreign timeshare appraised, but the remote location of their unit makes it not cost effective for an appraiser to perform a field inspection.  In many cases a desktop appraisal can be performed, however, as timeshare units are traded in a global market and there is a rich supply of data.

“Right-to-use” vs. Deeded Interest

In this case, the timeshare unit was not a deeded unit (a real estate interest), but simply a “right-to-use” share in a “vacation club”, entitling the timeshare owner simply the right to use a studio apartment unit anywhere in the resort network for one week annually during the “low season” for a period ending in 2049 .  Because the timeshare is not location-specific, this expands the selection of comparable units, as similar “right-to-use” shares in the whole network can be used as comparables. 

On the other hand, a right-to-use timeshare is inherently less valuable than a deeded unit because it is not a real estate interest.  If a timeshare resort company fails, the deeded owners still keep their ownership interests, but a right-to-use owner loses all rights. It is similar to the difference between a condo and a co-op apartment. Although deeded ownership is the preferred method of timeshare ownership, there are some reputable vacation club companies, such as Disney, that sell “right-to-use” timeshares only.
 
When a timeshare owner has been misinformed about value

When I receive a timeshare appraisal request, I warn the client that market value is not likely to be more than half of the original purchase price (unless it was purchased in the 1970s), just in case false expectations were created by untruthful salespeople or by fake resellers practicing advance fee frauds. 

An untruthful salesperson might promise that the timeshare investment will appreciate in value as an investment, as real estate has historically been a hedge against inflation. The unit could indeed appreciate in value if one considers that only 25 to 50% of the purchase price is the actual value of the real estate; the rest is just marketing and administrative costs – the costs of roping in the sheep with free breakfasts and fake prizes.  Even more so than with a new car, depreciation in the unit’s value will be significant and almost instantaneous.  For example, I see a Hilton Head resort still selling timeshares for $23,000 while resales in the same resort are simultaneously occurring at 10 to 15% of this price.  Depreciation will only get worse with time, too, as maintenance fees increase faster than the rental value of the unit.

Fraudulent resale scams

Fraudulent timeshare resellers are in abundance nowadays; many of them appear at the top of Internet search results.  They contact timeshare owners (including me) with bogus offers above original purchase price, but a substantial advance fee must first be paid. Then they disappear with the money. There were over 5000 such complaints to the Federal Trade Commission last year alone. (The last scam letter I received required me to act before September 12th; that must mean that the boiler room will be vacated on September 13th.)  This makes my job as an appraiser harder, as clients want to hold on to their inflated beliefs about the value of their timeshares.  It is hard for anyone to accept the reality that he or she has been conned. 
 
Two such resellers have already been shut down with 14 individuals sentenced to prison. Creative Vacation Solutions and Universal Marketing Solutions were shut down after bilking 22,000 victims in the U.S. and Canada of $30 million between 2007 and 2010.  Ringleader Brian Christopher Morris of Boynton Beach, Florida was sentenced to 14 years in prison. Another such firm, Timeshare Liquidators of Boca Raton, Florida, just received 5 indictments two weeks ago for a similar scheme, and Florida law enforcement is going after others.

In this particular case, the timeshare had been purchased for about $12,700 in 2006 and a reseller was promising $20,000, but comps supported a value no more than $2000. The reseller required the seller to make a $1750 deposit.  Perhaps the mystery buyer was a Nigerian prince?


One problem with timeshares is the ever-increasing maintenance fees that eventually overtake the rental value of the unit.  If the timeshare is not in a good exchange program, the unit owners will start defaulting on their maintenance fees to the point where the resort goes bankrupt.  Maintenance expenses always increase faster than consumer price inflation because they are subject to price inflation in maintenance costs as well as the accelerating deterioration of the buildings over time.

I remember appraising one such resort in the Poconos.  All of the timeshare owners had defaulted in a resort known as Mountain Ridge, which was developed between 1982 and 1989.  A developer had assembled the units all over again and renovated them to start the “fractional ownership” process all over again.

Five years ago I inherited a 1980s vintage timeshare at Fairfield Sapphire Valley in North Carolina with monthly maintenance fees of $40. Five years later, that maintenance fee is now $80, requiring me to pay $960 per year for a unit with a rental value of about $850 for one week. That’s a compounded 15% annual increase in maintenance costs over 5 years. I’ve never actually seen the unit; I exchange it each year through Wyndham, usually for a resort in Hawaii. The only saving grace to owning this unit is to participate in the Wyndham exchange program.

Is a timeshare a good investment?

The market for timeshare resales has rapidly become a buyer's market, assuming a buyer can be found. Timeshare user web sites such as redweek.com and TUG (Tug2.net) report that FSBO (for-sale-by-owner) listings have more than doubled in the last year. Many timeshares cannot even be given away because they are not considered worth their maintenance fees over the long term. Timeshare owners are legally obligated to pay these constantly escalating maintenance fees into perpetuity.

In general, a timeshare is a depreciating asset that eventually costs more to maintain than its comparable rental value.  The timeshare concept made more sense in a day and age of high inflation; it guaranteed affordable vacations long into the future.  In today’s reality of overbuilt vacation condos and resort overcapacity, there is no compelling reason to buy a timeshare.

Next stop:  Belize

 

 

 

  
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Thursday, July 26, 2012

Appraisals of "View Land" in Costa Rica



Much of my work involves flying to faraway places and then being driven in a 4-wheel drive vehicle into the countryside, up winding dirt roads, to a parcel of land with sweeping vistas featuring bodies of water, and then being told “Just look at this view. It’s priceless.”

I often encounter misconceptions of what constitutes the value of a “view parcel”. There is no argument that a finished lot with a view commands a premium over lots with no views. I emphasize the word “finished”, as “raw” mountainside or mountaintop land with views is usually priced and valued less than flat land at lower elevations.

Why? Because of the extra costs to develop land in rugged terrain or higher elevations.

Let’s indulge in a reductio ad absurdum to make my point.

The top of Mount Everest offers spectacular views, but I offered to sell you a lot up there, you would say “How ridiculous! How could I get my Range Rover up there? How and when could I get utilities connected? Where would I buy groceries?” I would attract no buyers, despite the magnificent view.

Suppose that I had already graded the lot and just completed a 4-lane road to the top of Mount Everest, installed all utilities, including digital cable, and even supplied extra amenities such as a golf course, supermarket, and gourmet restaurant? Now that might be something somebody is willing to pay a lot of money for, and the value would be enhanced by the unequaled views from the top of the world.

The extra costs of land development at such a high altitude would probably not be compensated for by the view premium for the finished lot, so this hypothetical unfinished lot on top of Mount Everest would be comparatively worthless.

View Land for Rich Gringos
Developers all over the world have spent the last few years acquiring “view land” for subdivision and sale to rich foreigners, whether they are North Americans, Europeans or Australians. Costa Rica is crowded with numerous proposed “5-star developments” as developers compete to attract rich gringos. Most of the developers are foreigners, too. Many of the projects have impressive artists’ renderings and obligatory photos of female backsides in infinity pools, beautiful women getting massages, Caucasian families frolicking on the beach, and exotic fauna and flora.




The result in Costa Rica, as I’ve also seen in Mexico, Fiji, the Dominican Republic, Brazil, Canada, and Barbados, is a surplus of unstarted or unfinished (see previous post on Barbados) 5-star projects and declining values for raw land.

Such was the case with two land parcels I recently appraised in different parts of Costa Rica. The dome-shaped parcel below looks very difficult to develop because of steep slopes, but there are views at the top of the scenic Orosi Valley. Also limiting value was the lack of approved entitlements and a well report indicating a water flow rate (10.8 liters per second) which can only support about 16 households.


The Orosi Valley


The other subdivision had distant ocean views and was farther along in the entitlement process, still not having local approval, and the “will serve” letter from the municipal water utility read more like “we might serve in the distant future”, as was their commitment to waste collection. This project had pre-sold 9 out of 94 lots in the last 20 months, at prices ranging from $100,000 to $270,000, but pre-sales stopped in 2011, and once pre-selling stops, it is very difficult to get it going again, as foreign buyers fear that the project won’t get completed and they may lose their deposits. When existing buyers see land prices falling, moreover, they may be willing to forfeit their $5000 deposits.

The foreign subdivision projects I actually see succeeding, on the other hand, are the ones aimed at the local nation's burgeoning professional class, offering lots and residences at lower prices within reach of the upper middle class and within commuting distance of major employment centers.  In the Dominican Republic, for instance, when a new highway improved accessibility to the beach towns east of Santo Domingo, such as Juan Dolio, Grupo Metro made a lot of money building condos and villas for sale to professionals working in Santo Domingo.  Similarly, I've seen the Palm Springs community north of Natal,  Brazil, achieve enviable pre-sales as new roads and a bridge to downtown Natal are enabling Palm Springs to become an oceanside bedroom community for Natal commuters, with lot prices starting at $30,000, certainly within reach of the middle class.

One stigma that is currently complicating lot sales in Costa Rica to foreign buyers are some spectacular development project failures, such as Hacienda Matapalo and Wyndham Jade, which are alleged to have been fraudulent schemes all along. There have been development scams, teak farm scams (see my post entitled “Costa Rican teak farms for gringo investors), and squatter scams (see my post entitled “Latin American land grabs from absentee owners”) going on in Costa Rica, many of which are being perpetrated by foreigners, too, such as Americans, Canadians, British and Dutch. That does not mean that local developers are any more trustworthy, and the inherent problem spoiling confidence in the real estate market in Costa Rica is its slow, ineffectual justice system.

Meeting a Costa Rican appraiser

In this valuation assignment, the developer asked me to meet “the independent appraiser” to discuss his recent valuation of the two properties together for a combined value of $12.4 million. Finding the “independent appraiser” sitting across from me at the lunch table made me doubt his independence, and his valuation reports were addressed to the developer.

The developer invited me to ask the appraiser questions. My first question was “¿Qué es lo que utiliza para las ventas comparables?” (What did you use for comparable sales?) His answer was quite unexpected but interesting. There is some institution, perhaps governmental, which has mapped out real estate values, and a Costa Rican appraiser consults the map and then makes adjustments much as any appraiser would. This is not the same thing as researching comparable sales, though, although the map is probably based on previous sales; I just don’t know how long ago they occurred.

Incidentally, all professional appraisers in Costa Rica, as in Mexico, are either architects or engineers, and are expected to have a more rigorous education in quantitative methods than in the U.S., where one can major in Psychology or Religion and still meet the academic standards needed to get certified or designated.

I am not an architect or an engineer, but as an appraiser I am a traditionalist. I like to use recent comps and listings (if the listing prices are below previous closed sales prices, and there is no shortage of failed subdivisions for sale in Costa Rica). Unfortunately, my estimate of value came in lower.

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Saturday, July 21, 2012

Appraisal of Unfinished Condo Project in Barbados


My previous appraisal assignment in Barbados was in December 2009, at a time in which vacation residence projects were faltering, the most famous of which was the Four Seasons Resort at Paradise Beach, which had already pre-sold multi-million dollar villas to the likes of Simon Cowell and Andrew Lloyd Webber. Construction had halted in the spring of 2009.

                                Unfinished Four Seasons Resort

Fast forward to 31 months later, and the situation for vacation residence development is still a difficult one, with many stalled projects all over the island of Barbados, including the still-stalled Four Seasons Project. Mr. Cowell and Lloyd Webber must be livid by now, and I can just imagine Simon rolling his eyes and overusing the words “appalling” and “dreadful”.

The most highly developed section of Barbados is its west (“Platinum”) coast, home to 5-star hotels and restaurants, world famous golf courses and polo clubs, and numerous sightings of UK celebrities and princes. In my previous visit, I saw Simon Cowell’s yacht parked off shore and was shown his red Range Rover in the parking lot. This is an area with a rich tourist infrastructure.

This particular project I appraised is different in its isolated location along the Atlantic shores of the island near the town of Bathsheba. Because of high winds, rough waters, and rough topography, the Atlantic (northeast) coast of Barbados is the least populated and least popular with tourists except for surfers.

In an island oversupplied with resorts, the developer planned an end run around the competition by building the only approved condominium resort on the Atlantic Coast. There is certainly no oversupply there, but there is a question about demand.

The Atlantic Coast lacks tourist infrastructure other than its popular surfing area. But do surfers buy million-dollar villas? The proof is in the pre-sales, of which there have been none after one year of marketing. The developer has turned to fractional ownership sales, too, but once again, no sale.

I thought the problem was in the pricing of the units, and this was also the independent conclusion of CB Richard Ellis, who came up with remarkably similar appraised values.

This developer had based unit pricing on the island’s easternmost resort, The Crane, which is a much larger resort with many amenities on the eastern periphery of the tourist area of Barbados. The subject is a 43-unit condo project at least 20 minutes north of the Crane, quite off the tourist path, and lacking the resort-style amenities (such as an acclaimed restaurant) that the Crane has.

The sad conclusion to this story is that the final bulk sale value of the completed units did not justify the remaining $9 million of construction costs, and this was CBRE’s conclusion, too.
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Wednesday, July 11, 2012

Appraisal of proposed solar farms in Ecuador

      Corn farm at almost 10,000 feet above sea level

In my native land of southern California, it is becoming common to turn marginal agricultural land into photovoltaic solar farms, particularly in Kern County, the Mojave Desert and Imperial County.  Some parcels have a unique advantage if they are located near a power grid substation, near a major city (Los Angeles or Las Vegas), and have enough water available for keeping dust off of the machinery (about one acre-foot of water per 20 megawatts of production. One acre-foot is equivalent to the water needs of about 4 households.)

Many landowners in these areas, most of whom are absentee, hope to get phone calls from solar farm builders who want to lease or buy their land.

Other countries have “Green initiatives”, too, and such initiatives give hope to owners of marginal agricultural land in Ecuador.

The farms I appraised were at opposite ends of Ecuador.   One was located about 20 km north of Quito, Ecuador’s second largest city, at an elevation of almost 10,000 feet above sea level, and one was located in the low-lying Guayas province about 50 km west of Guayaquil, Ecuador’s largest city.

        High voltage transmission lines on subject property

Both farms had high voltage electrical transmission towers on their properties, but only the Quito property was near a power grid substation, 2 km away in Pomasqui, which provides power to the entire northern half of the Quito metro area, having a total population of 1.5 million residents. This solar farm operator planned to supply power directly to the high voltage lines on his properties, which can be done in Ecuador because the power grid has single government ownership in Ecuador vs. the multiple private ownerships that sometimes govern power lines in parts of the United States.

This being the case, that anyone with a high voltage transmission tower on his property in Ecuador could supply electricity to the Grid, greatly increases the supply of available sites and provides little or no financial advantage to the landowner compared to his neighbors.  Neighboring farms with power lines near the Guayas property were selling in the range of $900 to $2000 per hectare.  Not a lot of value there. 

The property near Pomasqui was very difficult to appraise due to its unique flaws -- steep slopes and lack of accessibility; solar farms are not considered viable on slopes exceeding 10%. The escritura (deed) indicated that the property had been purchased for 1,680,000 sucres in 1997.  That sounds impressive until one learns that the Ecuadorian sucre was replaced by the dollar in 2001 at an exchange rate of 25,000 sucres per dollar, making the purchase price effectively worth about $67. Then again, it is common in Latin America to record false purchase prices in order to minimize transfer taxes.

To make matters worse, the borrower did not even own the land serving as collateral for the loans. Never was a purchase mentioned, either.  There was a misunderstanding of the concept of "loan collateral". A collateral lender expects the loan proceeds to go towards immediate purchase of the land; otherwise, what else is there to provide security for the loan?

Another complication for this assignment was that the client, a private lender, ordered an “as is” appraisal, and the borrower did not even have licenses yet for the solar farms. So the properties had to be appraised as agricultural land, which was a big disappointment to the borrowers.

In any case, there is not yet an established “market” for solar farms in Ecuador, making valuation a very difficult process, and even if there was one, 99% of the value is in the improvements and little value is in the land. 

PS: I have received several inquiries asking who is financing construction of solar photovoltaic cell farms, but the only financiers that I am aware of can only lend upon substantial existing assets. Any solar photovoltaic construction lenders are welcome to introduce themselves in the comments that follow.

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Sunday, July 1, 2012

Appraisal of land outside Regina, Saskatchewan

Saskatchewan is unique in Canada for its continuing economic boom, fueled by world demand for its potash and oil.  Similar mineral-led economic booms in places such as North Dakota, Wyoming and Western Australia have also led to housing shortages and rising land prices.

Before this valuation assignment, I last appraised in Saskatchewan during the Fall of 2010, and the boom has continued since then.  The property being appraised this time was almost one square mile of cropland right outside the city limits of Regina, SK, presently cultivated with canola and wheat, but in the process of being rezoned for mixed use to accommodate the expansion of the city of Regina, a city of 200,000 residents in the southeastern part of the province.

Appraising land in Canada is an easy assignment compared to most international work.  Each province has its own land registry system capable of providing comparable sales, and the prices for sales data are low in Saskatchewan ($20 got me 150 sales), and the last time I appraised in Alberta, their sales data were free. In British Columbia, the provincial land registry wholesales the data to middlemen such as Landcor, which costs several times as much, but is still a bargain.

A couple of issues relating to the conversion of farmland to residential development relate to the ability of the soils to support vertical construction and the potential for toxic contamination of the soil by pesticide use.  Another newly built Regina-area subdivision several miles northwest of the subject is currently sinking in the mud, for instance, due to the failure to discover the unsuitability of the soils until it was too late.

I normally like to read a geotechnical study and environmental report during the appraisal of a subdivision instead of copping out with the use of “assumptions and limiting conditions” that everything is assumed to be all right. A lot of money has been lost with assumptions, and I disagree with the appraisal profession's mindset that placing "assumptions and limiting conditions" in appraisal reports is good appraising.  It is not good appraising; it is dangerous appraising. Complicating the situation, though, was a lender client who let the developer set the stage for intransigence by refusing to show purchase contracts.

Although this was a Canadian property, I still follow USPAP (Uniform Standards of Professional Appraisal Practice set by the Appraisal Foundation, a U.S. institution), one of which is Standards Rule 1-5(a): “analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal”.  My request to see the purchase agreements spooked the developer, who called the client to call off my request due to the fear that I would practice “anchor bias”, the tendency among real estate appraisers to “hit the purchase price” in 96 to 97% of appraisals.

The developer’s fear was unfounded, as I do not practice anchor bias and am also mindful of USPAP Standards Rule 1-4(c): “When analyzing the assemblage of the various estates or component parts of a property, an appraiser must analyze the effect on value, if any, of the assemblage.  An appraiser must refrain from valuing the whole solely by adding together the individual values of the various estates or component parts.” This assemblage would probably be more valuable than the sum of its parts.

The comparable sales were rather consistent in this Rural Municipality – farmland was selling for about $2500 per acre, while close-in farms were being bought by developers for up to $20,000 per acre prior to rezoning. I certainly recognized the value of the assemblage going on, but my client's tacit permission to let the developer stonewall me hindered my ability to protect them.  When I asked for other information, such as a geotechnical study and the names of the current property owners, the initial responses were "Have a blessed day", and then "Geotechnical Report...not available at this present time" and finally "this question is un-usually [sic] and has no merit when completing an appraisal value report on a property."  

While I disapprove of the practice of most appraisers and valuers to defer essential issues as buildability and environmental contamination to “Assumptions and Limiting Conditions”, which often don’t get read by clients, I had to in this instance. If the soils or water table make construction infeasible or the soils are contaminated by pesticides, the value of the property reverts back to agricultural land values, a significant diminution of value.  I made my estimate of value conditional upon the receipt of an acceptable geotechnical report and environmental report and prominently displayed this by my conclusion of value, and then presented a separate value of the property as agricultural land just in case the developer refused to present relevant documents.  So far, this developer continues to refuse to cooperate.

As for why I ask to see purchase contracts, this is a USPAP rule (not required in Canada but sometimes followed), and it often alerts me to sales concessions, flips (when the seller is not the registered property ower), sales between related parties, or suspicious discrepancies, such as when a buyer or seller misspells their own name (suggesting forgery) or doesn't sign at all. The reason why I ask who the sellers are is if the sellers' names are different from the recorded property owner's names, the transaction becomes more suspicious. In a classic illegal flip, the buyer uses a disguise, such as an LLC or LP, to purchase the property at a lower price and then sell the property to himself at a much higher price, thereby fooling lenders and appraisers. The first time I saw this a doctor paid $1.8 million for an apartment building and then sold it to himself for $2.7 million, thereby tricking the lender into lending too much money on the property.

Lenders need to consider the consequences, though, of letting borrowers decide which questions they can decide to answer or not answer, which is tantamount to letting the borrower dictate appraisal policy and letting the fox run the hen house.

Next stop, Ecuador.

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