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APPRAISAL FRAUD
What is appraisal fraud.
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What is appraisal fraud? What is an example of appraisal fraud? What are red flags for appraisal fraud? How do you report appraisal fraud? How do I know my mortgage loan officer is not committing appraisal fraud with the home appraiser? Can a home appraisal be manipulated and if so, how? What signs do I look out for to see if there is appraisal fraud? What is appraisal fraud penalties? Is appraisal fraud a crime? What are the penalties for appraisal fraud? Who normally commits appraisal fraud? What is the difference between appraisal fraud and appraisal negligence?
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Understanding Appraisal Fraud: Appraisal fraud is a form of mortgage fraud. People commit appraisal fraud to inflate the property value and thus obtain a larger mortgage loan.
Appraisal Fraud means what? Appraisal fraud is an act in which the estimated value of a property is deliberately manipulated or misrepresented to favor the buyer, seller, mortgage broker, bank, or any other party engaged in the transaction. All these fraudulent activities can impose great financial losses and distort market mechanisms.
Example of Appraisal Fraud is Inflated Appraisal: An appraisal is done on a house, and it is valued at $400k, while its actual price is only $300k to get a higher loan amount. In this case, collusion between an appraiser and a mortgage lender can be used as a synonym for this.
Red Flags for Appraisal Fraud is to Pressure on Appraiser: A lender or a real estate agent may require an appraiser to meet certain price points.
Inflated Values: When the assessed value exceeds recent sales prices of comparable properties in that region. Unusual Adjustments: Large or unexplained monetary changes made to one’s home assessment report justifying an increased worth of your home are also some warning signs. Comparable Sales Manipulation: Non-comparable sales are used by appraisers to support their valuations. Inconsistent or Missing Data: Any inconsistencies in the assessment report, including missing important documents.
Reporting Appraisal Fraud: Anyone who suspects such kind of crime should inform:
State Licensing Boards: Each state has an appraisal board where one can lodge his/her complaint about unethical conduct involving appraisals.
Consumer Financial Protection Bureau (CFPB): This organization accepts complaints from mortgage lenders and brokers suspected of fraud.
Federal Housing Finance Agency (FHFA): It supervises Fannie Mae and Freddie Mac loans so that they will take care of appraisal fraud concerning those loans.
Federal Bureau of Investigation (FBI): Only cases featuring criminal acts are considered under this scenario.
Identifying Mortgage Loan Officer and Appraiser Collusion
Separate Communication: The appraiser should operate independently without contacting the loan officer for reasons other than necessary protocols.
Check Credentials: Verify the qualifications and reputation of an appraiser by reviewing information from state licensing boards.
Ask for a Second Opinion: A second opinion will be required in case there is doubt regarding the accuracy of an appraisal report provided.
Manipulating Home Appraisals
Home appraisals can be manipulated through:
Pressure: A fair amount of pressure is applied to ensure the appraiser hits the desired values.
False Comparables involve giving sales data that needs to be corrected or comparable—fabricated—improvements:
False reports concerning home improvements or features.
Signs of Appraisal Fraud
Unusual Appraisal Requests: Rushed orders and non-local appraisers’ are two ways such requests go against normal practices.
Inconsistent Data: Public records or MLS listings do not correlate with what appears on appraisal reports. Unfounded Adjustments: No good reason for making large adjustments in the assessment report has been given. This implies that they were mistakenly or intentionally made to deceive buyers into believing their property is worth more than it is.
Penalties for Appraisal Fraud
Criminal Charges: Appraisal fraud convictions are crimes punishable by fines or imprisonment. Civil Penalties: In addition to criminal charges, perpetrators may face civil penalties, including restitution and damages (US Department of Justice 1). Professional Sanctions: Professional boards may revoke licenses and impose sanctions on those found guilty of fraud-related activities involving appraisal services.
Appraisal Fraud vs. Appraisal Negligence
Appraisal Fraud means?
Appraisal Negligence means?
As a serious felony, appraisal fraud carries heavy legal and financial consequences. It involves deliberate manipulation of real estate values for personal gain compared to negligence towards valuation. It refers to innocent mistakes in assessing property. Thus, appraisal fraud becomes a crime once the appraiser intentionally misrepresents its value. In contrast, appraisal negligence is an act of unintentional mistakes or omissions made when determining the worth of property. Therefore, if you suspect any attempt at fraudulent appraisal, it should be communicated to responsible bodies to safeguard your interests and protect the integrity of the real estate market.
Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA), and Federal Bureau of Investigation (FBI) are examples of resources that offer a more detailed explanation.