One of the factors that led to the collapse of the real estate market in 2007 and 2008 was the rampant use of home appraisal fraud during the bubble. Mortgage lenders use the appraised value of the home as one of the key determining factors for deciding how much to lend to a borrower. Therefore, if the home is appraised at an incorrect amount, a mess can result.
Home appraisers are allegedly independent, but during the bubble they were all too often hired directly by the lender. What happened is that those who produced appraisal amounts that were favorable for lenders, were given more work by the lenders. This became an upward spiral of pressure on the appraisers to give their employers what they wanted, and the values were detrimental to buyers. This situation became a double-edged sword during the crash as properties lost actual value and the inflated value as well. Lenders found themselves foreclosing on and trying to sell properties that had no chance of selling for anywhere near the loan value.
Let the buyer beware and take action towards ensuring an honest and legitimate appraisal of a property. Lenders often work with a certain group of appraisers, but it is the buyer that actually pays the cost of the appraisal. There is no reason for the borrower not to hire their own appraiser instead of any recommended by the lender. This is a good check of your mortgage company. If your appraiser is legitimate and in good standing, but the mortgage company refuses to accept their appraisal, it could be a warning that the lender may have other motives.
Finding and hiring your own appraiser adds an additional element to the home buying process and is extra work, which is precisely why many borrowers are willing to accept the lender's recommendations. However, if the entire mortgage is based upon an inaccurate appraisal, this can result in massive losses for the borrower in the future. For this reason it is worth the effort to take the time to find and hire your own appraiser.
Finding local appraisers is as easy as looking in the yellow pages, but it is important to ensure that the appraiser is legitimate and in good standing. Be sure that the appraiser is properly licensed, check with the Better Business Bureau and the state attorney general's website to see if the company has received a lot of complaints or been the subject of criminal investigations or lawsuits. You can also ask the company to provide references, but this has to be viewed carefully as the company is likely to only provide the most satisfied of their customers for this purpose.
Even though it means a little more work for you as the borrower, hiring your own appraiser and making sure their license is up to date, etc., can save you thousands on a mortgage and keep you from years of credit trouble and financial loss. It is well worth the effort.
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
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