CNNMoney.com tackles the "Comp Check" issue in their latest series For sale: Scenes from a bubble.
The The appraisers: Price estimates made to order segment tells a story of a 27-year old Californian that was convinced by his loan officer his home had appreciated $82,000 in 12 months, even though "everything he had read said the market in his area was cooling."
How did this happen? As appraisers know, that scenario is all too common.
First, the loan officer sent a broadcast email to a number of appraisers looking for a target value. (see Fishing For Appraisers - The Comp Check "Bait & Switch" Technique).
Then, as soon as one of them took the bait, the loan officer called the borrower with the Good News!
According to an appraiser MONEY hired, Kim's house is worth only $580,000 and was at the time he refinanced the house. Yes, different appraisers often have different takes. In Kim's case the appraisers disagree about whether an enclosed porch counts as part of the total square footage.
The article is rather unique in that MONEY interviewed the appraiser that prepared the final appraisal report. He's quoted as saying, "Is there a problem out there? You bet there is." He adds, though, that he resists and that in Kim's case pressure wasn't an issue. "I never push values," he says.
"Appraisers who do comp checks know that they have to inflate values to get the order and get paid," says Pamela Crowley, a former appraiser who recently launched a site to catalog lending abuses, MortgageFraudWatchList.org.
Pamela says "When I started asking for the EVIDENCE of the pressures we appraisers are subject to on a daily basis, it was because all my loud mouthed activism was constantly being met with, “Where’s the evidence. We can’t do anything without the evidence.”
That's when she got the idea for the Mortgage Fraud Watch List. MFWL is a database of addresses, submitted by real estate professionals from all 50 states, where a sale or refinance transaction has suspicious activity.
I've been in contact with Pamela and hope that she'll share some of her experiences here on AppraisalScoop.com
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