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might be influenced by the builder's
indicated cost and are finding higher priced
comparable sales to justify this cost rather
than carefully studying the marketplace.
b. The higher value estimates by Epic's
appraisers are a result of using higher
priced comparable sales, higher land value
estimates which do not accurately indicate
the subject property's true market value and
model upgrade. The model "upgrades"
increase the sales price of the home and
typically make it the highest priced home in
the subdivision with the cost not typically
recognized by the end purchaser.
c. Epic should have the same concerns with
overvaluing as MGIC because of losses to the
partnership. Epic's expertise may be in
syndication and marketing not property
valuation. This would explain why they are
only now setting up an appraisal review
department.
Representatives of MGIC met with EPIC's management
on two occasions to discuss possible overvaluation of
properties. Circa 1983, MGIC ceased insuring EPIC
mortgages. The principal reason given for this action was
the concentration of risk represented by EPIC's business
and the fact that EPIC had switched from syndicating model
properties to production properties. Nevertheless, MGIC
wished to retain the renewal business for existing EPIC
insurance policies.
Similarly, beginning in December 1983, before agreeing
to insure any mortgage loans to an EPIC partnership,
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