Appraisal and Mortgage Fraud

I found another article that I think you will be interested in reading. This time, the article concerns appraisals and their effect on property valuations and mortgage fraud.

As you can imagine, I’ve some strong opinions on this topic. The fallout from these inflated appraisals, highlighted in the article, that I have seen first hand, is the expectation of value well over what the market says a property is worth, when the new owner finally attempts to sell their home. Imagine sitting with someone who believes their property is worth X and, when it finally sells for X minus a lot, they need to bring money to the closing to get out of the house!

I would point to these inflated appraisals as having a magnifying effect of our changing market. While the market will always be cyclical in nature, inflated property values will exaggerate the slower selling periods. Where perception turns into reality; the dinner-party chatting will inevitably cover real estate values and how Joe down the street got $500k for his home 3 years ago and I can’t sell my home for $575k right now. It sounds as if the market may have declined, but in reality, the rate of appreciation would have to be 5% a year for a comparable home to sell for $75k more in 3 years. I’ve not heard of 5% appreciation a year for a few years now!

What’s the point? Education. The more you know, as a consumer of real estate services, the more likely you will be to spot good deals and bad deals.