"For anyone who assumed that the toughened real-estate appraisal rules imposed on the mortgage market last year would mean less monkey business in home valuations, here's a shocker: Fraudulent appraisals soared in 2009, according to a lending-industry study released this week, and they now represent the fastest-growing form of home loan fraud." -- excerpt from Washington Post Article May 1, 2010
And it's as the direct and proximate result of real estate appraisers "rubber stamping" and subjectively manipulating property values in collusion with sub-prime mortgage lenders that led to one of the greatest debacles and the fall of the house of cards. This not only led America into the deepest recession since the Great Depression of the 1930's but also affected global economies as well.
The new regulations intended and designed to help eradicate this long standing, pervasive and insidious problem with real estate appraisers appears to have made matters worse or exacerbated the problem. Case in point: my father recently re-financed the mortgage on his single family detached home in Burke, Virginia and the real estate appraiser would not make any adjustment in a sales comparable that was on a 1/5 acre lot (o.20) that was located immediately adjacent to a rail road track versus the subject property that is located on an interior spacious 1/3 acre lot (o.30) on a cul-de-sac. As I told the appraiser, would the value be the same if you were to give your wife or fiancee a 1/5 carat diamond ring versus a 1/3 carat diamond ring and tell her, "honey they are from the same mine so the 1/3 carrot diamond would not be any more valuable than the 1/5 carrot one I just gave you." The appraiser capitulated after I challenged his appraisal or OPINION of value and refunded my father the full cost of the appraisal.
I am glad to see that real estate appraisers are finally coming under the microscope with these new regulations, but more needs to be done...
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