Don Gossman is a certified residential appraiser in the Kansas City, Missouri market but to you, he may be known as the guy who worked with the FBI. In 2006, Don was approached by the FBI to assist them in an investigation for mortgage fraud. During Don’s involvement, he assisted in the discovery of 61 properties involved in mortgage fraud, valued over 16 million dollars and causing a loss of 6.3 million dollars.
Over the past 12 years, Don has shared his experience and knowledge with others through speaking arrangements, continuing education seminars and most recently a book authored by Don – My Client, The FBI.
We had the pleasure of speaking with Don to learn more about his involvement and where he sees the market is headed today.
Buzz: Don, thank you for joining us today. We wanted to talk with you about your experience and the time spent working with the FBI. Can you tell us how you were approached with this opportunity?
Don: In 2006, I was contacted by a lender I never heard of before. They asked if I appraised high-end properties in the Kansas City area. The lender eventually faxed over a copy of the contract. After looking over the MLS, I saw the home had an active listing of $699,000 but the contract was for $1,473,000.
I called the lender to see if this was the wrong address or a rehab loan. The processor told me neither. I was informed that the buyers and seller had agreed to a higher sales price and if I wanted to be paid, I have to appraise the house for the amount of $1,473,000. After that conversation, I declined the order.
I have never seen a home overvalued by almost $800,000. It was alarming, and I was motivated to do something about it. During that time of my career, I spent the previous five years completing review work for sub-prime lenders and saw most properties were inflated $50,000 to $100,000.
The prior week, I attended an Appraisal Institute Fraud seminar that was taught by an FBI agent. During the break, we exchanged business cards and decided to meet for lunch. I reached out to her and provided her with the information needed to place that specific home on the FBI watch list. For me, that was going to be the extent of my involvement but before I knew it, I was wearing a wire and working undercover for the FBI.
Buzz: What market insights did you gain during this process?
Don: Since I had been reviewing fraudulent appraisals for years I knew the market was overvalued. By my calculations, it was overvalued about 20%. When I was working for the FBI, I found out the extent of the mortgage fraud on a national level. They had started looking at mortgage fraud in 2004 and it had become widespread all over the country.
Valuation fraud or appraisal fraud started decreasing with the development of the UAD. Before then appraisals were sent a PDF. In order to avoid a fraudulent appraisal, appraisers would have to review the report to assure the information was correct. But prior to the UAD, 90% of fraudulent appraisals were being processed through the system.
Buzz: What was your life like as an appraiser after you completed the assignment?
Don: I thought my life would go back to normal after the trial. Little did I know my life would never be normal again. In 2008, I was asked to write an article for the Kansas Real Estate Appraisal Board to warn appraisers on the problems of appraisal fraud. It was republished and then I was asked to give a presentation to the AARELO conference. Speaking appearances and articles continue on to this day.
We are all taught to do the right thing but how much of the right thing are you supposed to do? It was very costly, personally and professionally; lenders wouldn’t use me afterward. If lenders had the choice to use an appraiser that had worked with the FBI or one that wouldn’t – who do you think they would choose?
From working out of my basement in 2006 to teaching in the US Attorney’s office in 2011, this was something that I had never planned on or thought would ever happen. I didn’t choose this to happen, it chose me.
Buzz: Given your past experiences – do you think the market is headed in a similar direction to where it was in 2006?
Don: Yes. The market is going back to how it was before the crash. Lending standards are being eased, appraisal waivers are being granted, and hybrid appraisal reports are being developed. The problem before the crash was undue influence on appraisers to overvalue properties. Now, they want to do away with appraisers and use artificial intelligence to determine values. But that is where the numbers can be manipulated.
Buzz: Are there certain factors or “red flags” appraisers can look for to avoid making the same mistakes that were made 12 years ago?
Don: On the residential side, appraisal fraud has decreased 44% from 2004-2009. Today, it is at a low of 4%. However, appraisal fraud is increasing in multi-family appraisals, flips, and mortgage fraud. Many appraisers are feeling appraisal pressure on multi-family units or apartments. There are not many ways to verify the information on those appraisal reports, so the values can be questioned or influenced.
Buzz: Thank you for taking the time to speak with us, Don. Before we conclude this interview is there anything you would like to add?
Don: On July 31st, 2018, I had the honor of being the keynote speaker at the Appraisal Institute’s National conference. I have developed a continuing education seminar, My Client, The FBI – What the St. Louis Federal Department knew before and after the crash.
The seminar has been approved by the Appraisal Institute nationally, Missouri Real Estate Appraisal Commission, and the Kansas Real Estate Appraisal Board. I am in process of receiving approval in all 50 states.
To review the “Thank you” notes from teaching the federal agents or if you wish to purchase My Client, The FBI – a book on my experiences, please visit dongossman.com.
To inquire about a speaking engagement or teaching seminar please visit gossmanappraisals.com.
Or contact me directly at firstname.lastname@example.org.
Thank you for inviting me for this interview.
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