Nobody Likes Appraisal Fraud

I’ve been getting some “hate mail” from people who obviously have a vested interest in getting a message out that the appraisers did nothing wrong. This is the equivalent of saying the rating agencies did nothing wrong rating securities AAA when they were worthless.

The simple facts are that the “lender” had no skin in the game so there was no actual underwriting and no risk. SO the usual appraisal verification was skipped. AND the appraisal process was flipped on its head. Instead of using the lowest appraisal possible so as to decrease their risk of non-payment, they pushed the appraiser to come up with the “right” number so they could close the deal which meant overvaluing the property.

This behavior increased the risk but resulted in the same fees to the “lender” for impersonating a Lender. The incentive was to close the deal without regard to repayment through borrower performance or selling the property.

41 Responses

  1. False appraisal is a very serious crime. Anyone caught doing this will go to jail immediately.

  2. Simply put folks. real estate appraisals are not valid because they are produced by people who are totally dependent upon the commissioned salespeople who hire them, and likewise the banks who had no skin in the game.

    These conditions represent a perfect conflict of interest and therefore invalidate the results. Most, if not all mortgages could be rescinded under this fact.

  3. Op-Ed: The Role of Appraisal Inflation in Loan Securitization
    By George W. Mantor Print Article
    RISMEDIA, July 13, 2010—Street level appraisers have been getting a lot of heat for their role in the rise and collapse of real estate values and most of it is unfair. Without exception, every appraiser I have ever met was professional, direct, and considered the facts when arriving at his or her opinion of value.

    That isn’t to say that there aren’t dishonest appraisers. I’m certain that just like any occupation, the percentage of bad apples probably mirrors the population in general.

    And, there is no question that there is pressure, both subtle and not so subtle, to hit the “right number.” Opportunities certainly exist for appraisers to profit from either inflating or deflating values. But, blaming them or suggesting that they were responsible for the crash, fails to acknowledge the parties who had the most to gain from inflating values—like Wall Street.

    Much of the misunderstanding emanates from an inaccurate view of the residential appraisal and its role in financing. The appraisal is not undertaken to determine the value of the property so much as to satisfy the underwriter that the risk is acceptable.

    People are often shocked to discover that the appraiser already knows the contract price. But, the appraiser’s purpose is simply to verify that on the day in question, comparable properties were selling for similar prices.

    It is but one piece of the financial intermediaries’ efforts at controlling risk. If the ability to collect on credit default swaps was contingent on a certain percentage of loans failing within a particular pool, then controlling risk is vital.

    The appraisal is also part of the documentation used to support the quality of loans in a securitized pool. The financial intermediary wants the investor to believe that the value of the security is sufficient to justify the risk.

    Comparable properties or “comps” are the meat and potatoes of the vast majority of residential appraisals.

    There are other types of appraisal methods employed by lenders depending on either the uniqueness or complexity of the property being offered as security. But, for most residential lending purposes, underwriters rely on the comparable property method.

    Most of the housing stock of the last fifty years has been tract development, both vertical and horizontal, offering only a few variations among thousands of homes.

    Large areas of homogeneous housing make valuing homes fairly simple. They are a commodity. If they are clustered together, one can quickly see what a buyer in that area has to choose from.

    That’s it. No complex algorithms or cryptic equations, just the principle of substitution. And that can change overnight if certain events occur.

    Anything that brings more homes to market than the natural pace of activity can absorb will drive down the prices that buyers will negotiate.

    One of the remarkable things about the period from 2004 to 2007 was the buyer’s willingness to pay more and more, and doing so because they believed that the replacement cost, i.e. the price of new construction was rising dramatically.

    It is no mystery why the states that had the greatest amount of large scale new home construction also had the fastest appreciation rate despite the fact that you would think that all that over-building would keep prices flat or drive them down—but, no.

    But, Wall Street had even more to gain than builders. Inflated values were a solution to a lack of borrowers. Demand was so great for the pools that they had to find a way to expand the market, and trigger the defaults.

    They keep getting away with saying they didn’t know this would happen, and I keep saying that every consequence of this financial debacle was not only known to them, it was planned for, lobbied for, implemented by them in contravention of so many laws and regulations that run the gamut from local, city, county, state and federal that it suggests that there is literally nothing they would not do to make a buck.

    They absolutely knew the consequences and got rich from them.

    Remember, risk analysis is what they do. They are researchers, social scientists, accountants and lawyers.

    They analyze risk and, as part of their business model, they are always keenly aware of value trends. They knew that one of the factors that would influence defaults would be a steep drop in values that would prevent the refis they promised and contribute to defaults across all pools of loans.

    You may wonder, what difference does it make if they knew or didn’t know the consequences? It’s an element of proving fraud.

    A misrepresentation is fraudulent if the maker (a) knows or believes that the matter is not as he represents it to be, (b) does not have the confidence in the accuracy of his representation that he states or implies, or (c) knows that he does not have the basis for his representation that he states or implies.

    We keep forgetting the tool in all of this was information. The financial intermediaries had it and they studied it, and their denials that they knew this would happen fail in the face of their own research.

    I found an interesting piece of that research, a little 20 page document called innocuously enough, “Global Economic Paper No. 177.”

    It is produced by none other than Goldman Sachs Research Staff and its subject is Home Prices and Credit Losses.

    “Regarding mortgage credit performance, feeding the predictions from the home price sales model into the mortgage loss model…”

    Did you get that? They actually have pricing and default models. They know exactly what a home is really worth and they don’t even need an appraiser.

    They knew exactly what circumstances were contributing factors to default.

    They knew that the inclusion of certain terms in mortgage loan documents would cause foreclosure rates, which historically ran around 1% annually, to skyrocket to over 10%. Currently, as of mid-July 2010, nearly 13% of home loans are in default.

    As a result, about a quarter of American homeowners have negative equity in their homes. Had the values been real, they would have held.

    They knew that there were not nearly enough borrowers to place into loan pools to satisfy the demand.

    They knew that wages had stagnated and affordability was becoming prohibitive to further lending.

    The key to it all—inflated appraisals.

    George Mantor is a nationally respected authority on all areas of real estate and is frequently quoted in a wide range of publications. He is an oft invited guest of Fox Business Network and for many years, he was the host of “Keepin’ It Real…Real talk about the real thing, real estate” on KCEO radio.His articles have also recently appeared in Real Estate Finance, The Real Estate Professional, National Real Estate Investor, Broker Agent News, and Realty Times. His blog is

    RISMedia welcomes your questions and comments. Send your e-mail to:

  4. “I am sending you out like sheep among wolves. Therefore be as shrewd as snakes and as innocent as doves.” Mathiew 10:16

    Our eyes have been opened. We were looking to buy a house in Georgetown, TX which a short-sale broker (who by the way says we have to use their loan broker) who’s appriaser says is worth $470K. When we hired an independant appraiser the value came in at $410K — which aligns with 2009 tax assessment and declining market conditions.

    Thx for your eye opening insights.

  5. Alina:

    You stated: “In my case the agent of the lender and the lender were one and the same.”
    That statement is what’s known as a legal impossibility!

    You stated: “The essence of what I wrote still stands, you have to have sold proof of any malfeasance on the part of the lender and/or its agents.”

    Forget the “lender” and I’ll agree with you!

  6. Storm,

    In my case the agent of the lender and the lender were one and the same. Let’s not split hairs here. For me, there was no distinction.

    The essence of what I wrote still stands, you have to have sold proof of any malfeasance on the part of the lender and/or its agents.


    I’m using “lender” as a generic term, “creditor” “lender” really doesn’t matter, because you’re still being led down the rabbit hole.

    First, “Wall Street” had nothing to do with your mortgage transaction. What happened AFTER you AGREED to the terms of your mortgage/deed of trust really is of little consequence as far as getting remedies. Go read what rights you gave up on yours!

    Second, you should read up on agency law.

    Third, if this is the avenue (rabbit hole) you’re pursuing, I hope you’ve saved enough money to move. The track record of those going down the same rabbit hole that you are is abysmal!

  8. Storm

    First you have to know whether you are even dealing with “agents of the lender” – and who the real lender was. And, let us be careful when we use the term “lender” – as opposed to “creditor.”

    You talk about lenders and stockholders and “duties” – stockholder in what – the originator? Read the complaint that Foreclosure Fraud posted on this blog. Then make sure you have your identifying labels correct.

    Will make sure this complaint gets to every avenue and contact I have. Goes against what the media and many have promoted to date. Time to face the truth.

    The mortgage brokers, appraisers, title companies – not to say they were not also guilty – answered to captain of the ship – Wall Street. And, by the way, many of these mortgage brokers, appraisers, title companies – are gone – their source (Wall Street) no longer supports them.

  9. Hi Alina:

    Not so fast, we’re not in agreement yet. You read what you wanted to be there, which is the problem I’ve been talking about, those that misread or misunderstand what they read.

    I didn’t say “they must have evidence of wrongdoing on the part of the lender.” I said: “the homeowner MUST have evidence of wrong doing on the part of the AGENTS of the lender!

    Legally, the lenders, for the most part, did nothing wrong, they had a fiduciary responsibility to their stockholders to make money, which they did. I know most people on this blog disagree, but the wrong doing, against the homeowner, came mostly from mortgage brokers, appraisers, title companies etc. etc., not the lenders themselves!

  10. Storm,

    For the first time I agree with you when you state that if the homeowner wants a settlement on their terms, they must have evidence of wrongdoing on the part of the lender.

    The pretender lender is the entity that the homeowner dealt with and they are the party that made promises which they never intended to keep. Once a homeowner has this nailed, the rest is gravy.

    Homeowners feel betrayed by the pretender lender and want answers as to the true identity of the owner of their loan. Homeowners have been lied to from the inception and they simply want to be dealt with equitably and honestly. At least that has always been my motivation – I just want the truth.

    wow, do think my agreeing with you will start a new trend?


    My “real” motive is to make sure homeowners are not ripped off by paying for needless law suits, that at the end of the day only STALL foreclosure. As I’ve stated many times there are numerous ways to stall foreclosures for free,

    However, if the homeowner wants money damages, and/or a settlement on their terms not the banks, possibly their house free & clear; the homeowner MUST have evidence of wrong doing on the part of the AGENTS of the lender!

    Foreclosure defense is very clear water, being muddied by those, who misunderstand the law and the facts regarding very simple principles.

  12. “Appraisal is the linchpin of mortgage fraud” – FBI

  13. But Storm – still have to know your real motives —

  14. Well – something posted by Storm – to agree with!!

    For Stephen and PJ

    All is about money – about profit – the people do not matter. Nearly destroyed America – of course the government stepped in and bailed it out before a complete collapse. Remember Mr. Henry Paulson – begging on his hands and knees to Congress – to help the poor banks???

    But, America is still about the people – the government has failed them – and America continues to suffer – not just the victims – but now spillover includes many more.

    So the government bailed out the banks for their fraud – time to now turn to people. The people are now wiser. When will Congress and the courts get wiser??? – when the lobbyists go home.

  15. Bottom line: Real estate appraisal is a ruse. There is no oversight of appraisers, they are completely under the control of commissioned salespeople and the the appraisal process can only be described as a combination of obfuscation and ambiguity. Appraisers use whatever numbers they want to back into the bottom line that is dictated to them, and if they don’t hit the number, they don’t work, period.

    Think I’m shooting from the hip? Don’t take my word for it. Go get an appraiser’s license and see for yourself.

  16. Neil,

    I need a lawyer that gets it. There are a lot of fraudulent activities involved with my mortgage with Nationstar.

  17. The appraisers worked along with the lenders to give them the appraised values they needed in order put the loan through. That is the honest truth!!

  18. There are so many of these phonies with blogs that censure anyone that disagrees with their views. It’s pretty clear that anyone that wouldn’t let bad comments be presented along with the good, obviously has something to hide and can’t be trusted!

    When one puts oneself “out there” with sometimes controversial views and comments he is going to catch it from all sides. Some comments flattering, some comments indicting, but the mark of someone with values is to accept and publish them all.

    Well Mr. Garfield, my hat is off to you. I don’t always agree with you, and you not with me, but that’s part of public discourse. But, I must say the First amendment is alive and kicking here in this arena you have created. All are invited to come and argue and/or agree on a given topic. But, more importantly, you allow ALL comments to be made public without censure. You are to be congratulated!

  19. Have to chime in here… this Spring was helping a retired senior with their property tax grievance… the “hired county appraiser” was using sale’s/comp from 2005-07 to justify an an already crushing property tax…

    And lets not forget those school districts that are turning out such a wounderful product… our ill prepared next generation and their hand in this scam of inflated unjustifiable property tax assessment to pad their salaries, pensions and life long benefits.

  20. Todd

    Why are you following this blog?

    There is no doubt that appraisals were – simply false – that is why we have had the massive correction in home prices. Whether or not the intent was to criminally defraud – is not relevant. Clearly, the intent was profit by the creditor affiliates in the process.

    More importantly, since mortgages were granted largely on the inflated “asset” – and not the income of the borrower – this is called “Predatory Lending/” Criminal? maybe not – Fraudulent? yes.

  21. Neil

    Your comment exudes ignorance. I thought you were smarter than that! It’s the same poor reasoning to satte that all wallstreeters (you inclusive) were behind the fiasco and scamming as an ‘insider’. There are many ethical appraisers, though we are hard to find due to the banking industry control over most neophyte
    licensees who sold their souls (signatures) for $300 oper report. Try IR/WA and Columbia Institute’s Mr. Harrison too. Do you also falsely believe that the road system and pipelines and electrical grid too were all obtained by falsified means via appraisal fraud .. if so, you need to see a psychiatrist (soon). It is one thing to push this site and your depth of knowledge on the securities and MBA status of banking as you know it: it is quite another to make erronous generalizations to which you know are insultingly false (ie, fraudulent) against ALL appraisers. I tried to communicate with you back in February re: Phoenix seminar, but your arrogance then too did not allow you clear foresight to accept and acknowledge the limitations of your own intellectualism. You’re great in your own right, we accept that or we wouldn’t read your blog/site here; but there are BS’ers, PhD (piled higher and deeper) and then there are true-hearts (Hopi) whom never place $$
    before truth and common sensical insight to learn. Temper your attacks on appraisers to include those whom participated with malice of forethought (ie criminal intent to defraud) and the others will not attack you with emails. We do not defame your character pre-hoc just because you went to Harvard, presuming your
    arrogance and loss of touch with the common man.
    Do us the same respect in turn, OK. There is a rule of law regarding appraisal called USPAP and the ACS at the Appraisal Foundation in Washington can address and take comments and go after abusers, this is why my prior emails focused readers toward their own state’s Department of Regulation & Licensing to report the abusers and fraud … that’s the correct venue, and that’s the corrective measure to pursue first as it takes the appraisers (license) to task where it hurts most … in their wallet and their business base. Thanks, Neil.

  22. I also refinanced with a mortgage broker that had an inhouse appraisal company/ For all I know they didnt even exist.
    I never met with my refinance broker Andrew at Alliance Home Mortgage (working with World Savings)
    He made up numbers and didnt tell me .
    he pretended to be caring and kind as my Grandmother was dying (sent me a sympathy card)
    But in reality he was taking a 8k fee from me and then an 8k fee from World Savings to push a toxic pick a pay loan thru I never signed up for.
    I signed my refinance papers in my kitchen when the title company agency stopped by my house.
    My grandmother had just died 3 before but they wouldnt put off signing the papers.
    I never noticed I was put in a the wrong loan, with the wrong rate for many months.
    I then noticed that not only did they screw up my type of loan, they also listed me as a man (im a woman) on my mortgage note AND the world savings/alliance brokers didnt even properly sign the mortgage.
    The sage of getting my mortgage straightened out has dragged on since may 2007 …Wells Fargo keeps playing games and telling me that only Wachovia can fix / modify my mortgage But wachovia always manages to lose at least one document.
    Truly evil and depraved.

  23. I also refi’d with a mortgage broker (Alliance Mortgage in Conshohocken PA)

  24. Stephen

    Great work ! Ever consider being an expert witness ?
    Where do you live ? Hopefully AZ.


  25. Hey Anonymous from Atlanta- I am in Arizona 🙂 And am building a Pro Se case for my own house with WAMU/Bof A and Countrywide/JPMorganChase. Got any good pleadings? 🙂

  26. Look, I know people who got an appraisal immediately after the loan was originated. Appraisals came in far less than the originator stated. But, agree with Alina. Would love to promote this is court – but – my insiders tell me that the other side is ready and waiting to counter any inflated appraisal challenges. They are prepared – and waiting to counter. For the most part – they will claim – market demand created the appraisals. And, the sales show it.

    Agree – all was false. Prefer to go with the premise that market prices should never have collapsed as rapidly as they did when the crisis hit. The crisis was a result of a collapse of financial instruments – and resulting government intervention -that falsely propped up derivatives and securities- covered the sharp market drop. Otherwise – had the government not intervened – your home would be worth zero dollars today. But all was to protect the banks – and at the cost of the homeowners – victims of a long charade.

    The bottom line is that home owners were left with no avenue to correct their situation – a situation that was promoted by Wall Street greed. That is what our government refused to address – liability lies with Wall Street – but continued foreclosure fraud lies with the US Government – its’ agents and representatives.

    Demand and Supply is basic 101 Economics – but – demand and supply mechanisms do NOT cause collapse in an instant. The government saved a manipulated and fraudulent market – and told us to chalk it up – via a short sale, foreclosure, or deed in lieu of. They simply did not – and do not care. Their influence in courts is apparent. But, we voted them in. What are we doing about it?

    False appraisals are a large part of the fraud – but market demand and supply theory will challenge the blame. Much was involved. This should have been addressed by Congress, the Administration, and appointees – it was not addressed. They are just as much to blame. And, we have let them – abuse us. No game plan will survive under the current conditions in Washington.

  27. The flip side of this story is how false appraisal’s hurt so many by increasing “property taxes” which local bloated lazy governments were more then happy to impose on unsuspecting people on fixed incomes, young families ect. The damage done by appraisers who grease the political wheel at the town, village , county and state level is just as egregious.

  28. Stephen,

    Your article brings back so many memories of eminent domain world. I created spreadsheets and a database to track the comps used by the appraisers. It was interesting to see the difference in appraisal values based on whether they performed the appraisal work for the landowner or the condemning authority. The appraisals prepared on behalf of the landowners were always significantly higher than the appraisals for the condemning authority. Usually, the appraisers used the same comps but might switch one comp out to lower or raise the value depending on the value they wanted.

  29. The Truth about Real Estate Appraisal
    By Stephen G. Bishop

    It is time, actually has been for many years, for the general public to learn what a real estate appraisal really is. The information provided herein is neither conjecture or opinion, nor attitude or inference. It is factual, tangibly supported and, while incredible to ordinary professionals, nevertheless is organized crime behind a mask of regulations and licensing. The FACTS delivered here are from an insider who has experienced the real conditions of real estate appraisal, which are only acknowledged with the wink of an eye among conspirators.
    Having spent thousands to earn an appraiser’s license twice in eleven years in an attempt to escape the mind-numbing boredom of corporate finance, I feel the need to educate the consumer about how real estate appraisals are prepared and how appraisers are educated and trained. This because those who buy, sell or refinance a piece of real estate are naively confident that the appraisal has been prepared by a highly educated professional with many years of experience, and that experience is synonymous with expertise.
    The simple fact is that the field of real estate appraisal is a closed society, primarily dominated by nepotism (all in the family) and a dark underworld of misperception, deception and child-like simplicity which exists to rubber stamp values determined by real estate agents, brokers, loan officers and realtors.
    Appraisal defined
    A real estate appraisal is little more than copying data from public records into a state-recognized format with a simple comparison between recent sales of same or similar properties. There is quite a bit of narrative included in most appraisals, but that too, is primarily copied from one appraisal to another and rarely is specific to the properties appraised.
    Qualifying comments are generic in nature, and some appraisers add water to their appraisals by writing lengthy “Addendums” at the end of their appraisals. These “Addendums” add depth, breadth and volume to a highly simplistic and imprecise “Estimate of Value”, which is what an appraisal is defined as by the pipe smokers at the North Pole.
    Many hours, persons, office spaces and utilities, paper, computers and postage have been spent in an attempt to properly define a real estate appraisal. These multitudes of resources have combined to define a snapshot of a property value. Truly an extraordinary army of erudites burns midnight oil contemplating such terms as “Property” and “Time of Appraisal”, to mention a few. In reality, those on the receiving of these highly generated documents couldn’t care less about the academics. They just want a number, and if it isn’t the number they want, the appraiser must go back and rework the appraisal, or find a new client. The comments in the appraisal (remember all that verbiage?) must not contain any negative comments, especially things like “Holes in the roof” or “Cracked foundation” or “Rests in the ghetto” as these are sure to kill the deal and defeats the true purpose of the appraisal, which is to get a loan for some poor soul who thinks he’s in the hands of the good fairy, even though the “Good Fairy” may have a felony record, is unable to get a normal job, and has found a cash cow in a naïve society.
    Appraisal Education
    No formal public education is required to be an appraiser above a high school diploma. While appraisal may be a course in a real estate curriculum in some colleges, 99% of specific education is only obtainable through shopping center schools for profit, who are more than happy to sell anyone an expensive series of courses without telling them that chances of becoming an appraiser are near-zero, especially if the prospective student thinks that knowing and following the rules is the road to prosperity.
    These classes are filled to capacity, generate big bucks for the promoters and provide all one needs to know to be an appraiser in 4 or 5 pretty books less than ¾ of an inch thick, while instructors hammer ethics, ethics, ethics into the spongy student, while failing to mention once that the program is designed to keep new appraisers from entering the field.
    To summarize appraisal education, there is no shortage of expensive, water-filled courses, seminars, books and lectures to fill the aspiring appraiser with much ado about nothing! The reason colleges do not offer degrees in Real Estate Appraisal is simple: There isn’t enough substance to stretch over a semester or quarter. Real Estate Appraisal is a sub-function of real estate and can be assimilated by a high school graduate in a few weeks. Which leads directly into the subject of experience.
    The greatest façade of real estate appraisal is experience. A common illusion is that appraisal experience is synonymous with expertise. In reality, the opposite is more often true. Given the depth and breadth of real estate appraisal, one reaches the limits of knowledge in a few months and twenty years of experience is 1 year 20 times. It is the perception of other professionals and the public that experience implies constantly expanded capabilities and knowledge. In the real world of appraisal, the most senior appraisers tend not to have a college degree, no education in Accounting, Business Administration, Economics, Marketing, Statistics or any of the other higher level skills which one would think would be inherent in a high-income, independent occupation. It is not uncommon to find a “Senior” appraiser with the highest level license measure a property with a measuring tape, do calculations longhand using Boorum & Pease ruled pads with frequent erasures and fundamentally computer illiterate. Yet, these people are hired by lawyers to be “Expert Witnesses” for thousands of dollars to testify in a court of law.
    You see, experience is everything in appraisal because it is a semi-skilled trade, requiring little education, low barriers to entry and a limited technical knowledge base. As a result, the primary way a senior appraiser can distinguish themselves from junior appraisers is experience.
    It came to pass that, after the S&L debacle in the late eighties, the federal government demanded that appraisers be licensed.
    This, supposed the Fed would put an end to the corruption and fraud of real estate appraisal, and so governing documents were created, state government offices of appraisal oversight created, courses developed and a program of licensing implemented.
    The result of all this is that the corruption and fraud worsened, rather than lessened. The reasons for this are two-fold: It actually lowered the bar for new entry into the field and the feeding frenzy for licensing and training fees created an abundance of new licensees with few alternatives for employment, unless devious means are used to skirt the system. The impermeable membrane of real estate appraisal which was supposed to keep the bad eggs out, actually drew them in, because only the unprincipled will circumscribe the prescribed career path set forth by the states. Those of strong character, disillusioned into thinking they were entering a profession of integrity simply throw the licenses away when they learn what is necessary to use them.
    One appraiser described real estate appraisal as a combination of “Ambiguity and overkill”. Ambiguity abounds as there are only ten highly generalized rules of appraisal, and therefore much left to interpretation, while the length of the apprenticeship, formology, and control of the appraisal process would choke a horse.
    Take the license level “Trainee”. After taking 5 or 6 courses and passing a state exam, an aspirant acquires a Trainee License. This license requires that the new appraiser be under the complete control of a “Supervisor”, which is simply an appraiser with a higher level license. As in other unskilled and semi-skilled trades, the Trainee is regarded as developmentally retarded, having no skills or other work experience and quite incapable of performing even the simplest tasks without strict guidance. Of course, many enter this field from other professions, have infinitely more education and life skills than their so-called “Supervisor”, who regards him/herself as a genius. Woe is he/she who comes into this field with a bachelor’s degree in business administration, accounting, math or similar disciplines and tries to employ these attributes as a Trainee in appraisal. For one thing, most of the underlying assumptions upon which real estate appraisal is founded are erroneous and reflect a gross lack of academic source.
    For a mature, educated professional to enter the appraisal field, two years of apprenticeship is sheer torture. An exercise in reversion of intelligence and capability and mind-numbing boredom.
    Though it is extremely difficult for an educated person to dumb down for two years of apprenticeship, it doesn’t really matter anyway, because noone will hire them. You see, the basic program is designed to fail. Why would a veteran appraiser train his/her future competition? The answer is, they won’t, unless they can exploit the Trainee to an infinite degree by working them to death for little or no compensation (which is against federal labor law). Some “Supervisors” actually charge the downtrodden Trainee for his signature on their hours log. The Trainee lives for the 2,000 hours required to advance to the next license level and independence, and this is a valuable carrot for the supervisor to extract free labor.
    Appraisal Accuracy
    Appraisers value a property by adjusting the differences between the subject and comparable sales. They employ factors, such as dollars per square foot to adjust for differences in square footage. These “Factors” have little to no substance as they are typically handed down from generation to generation without knowing where the number originally came from, or are picked up from the “Supervisor” who got it from hearsay, and the factors employed vary from appraiser to appraiser as much as animal species vary. Three methods of valuing a property are employed by the appraiser and the three are supposed to be tangential and validate one another. This is a fallacious assumption, and reflect little application of economics or common sense.
    Yet, these methods are pontificated by senior appraisers/Supervisors as undeniable facts.
    Homeowners often ask, “Can’t I do that myself?”. The sad fact is that one can simply pick up a newspaper and value their property with more accuracy than a seasoned real estate appraiser. This is because the compounded effects of fallacious assumptions, lack of standard factors and disagreement among appraisers as to values employed actually renders a formal real estate appraisal more harmful than beneficial. Combine this with the utter absence of ethics in the appraisal industry and one quickly realizes that real estate appraisals could be eliminated from the real estate transactional process, reduce the cost of the transaction, and protect both parties from harm.
    While ethics are shouted from the pulpit in appraisal courses, they cease to exist upon graduation. This is primarily due to the fact that appraisers are employed by the most unethical workers in any industry….Brokers, Agents, Realtors and loan consultants. The real estate industry is one of total anarchy, dominated by the most unscrupulous, easy money seekers on the planet. Real estate “Professionals” as they refer to themselves, will do anything to make a deal, have no oversight except a token agency at the state level which looks the other way as long as it gets it’s fees, and earn obscene commissions for a few hours’ work. This includes hiring their own appraisers, selected according to their flexibility in rendering a value opinion. Guess what? The appraiser who hits the number the most, gets the most work. A successful real estate “Professional” will always have a “Damned Good Appraiser” in his/her hip pocket, usually in a long-term relationship, who makes every appraisal value equal the number needed to make the deal work.
    Ethics is both inherent in the character of human beings and defined for them in terms of the working world later in life. Therefore, it is difficult for the average humanoid to be unethical in the course of ordinary life. A genetic malformation occurs when one has substandard capabilities and a lust for extraordinary income. Although real estate “Professionals” have ethics hammered into them, many are frequently found to have criminal records and/or no other employable skills. One can obtain a real estate license as easily as one can acquire a new car. Background checks are frequently not conducted. The agencies in control subsist on licensing fees, not on background checks and enforcement of the rules. One only need read the number of persons in the field (real estate and appraisal) sanctioned, punished or whose licenses have been revoked to validate this assertion.
    A simple test of the level of enforcement of rules and ethics is to file a complaint against another “Professional” in the field for blatant fraud and wait for the response. And wait, and wait, and wait. You see, the Department of Real Estate and the Office of Real Estate Appraisers protect the bad guys and whistleblowers, or those who believe their competition should follow the rules are ignored, stifled or forced out.
    Much more regarding the ruse of real estate appraisal can be presented, space permitting. The simple fact is that the industry is actually the opposite of what it purports to be. The FBI labels the real estate industry, which includes appraisal as “The New Mafia” and “Organized Crime”. Truly, a conspiratorial relationship between real estate professionals and the lenders who accept their bogus loan applications (because they just sell them anyway) in an absence of risk management create a truly incredible industry of scofflaws not unlike a swarm of locusts who decimate the countryside and fly off with full bellies while the land is left barren and infertile.
    While supply and demand may play a role in real estate market prices, one needs to consider what creates extraordinary demand when no other factors change significantly. A dramatic runup in prices, when incomes are flat, supply is sufficient, consumer credit is overextended, the cost of living rises constantly and prosperity lies in the hands of the elite, can only be attributed to one primary cause. Inflated appraisals. If an appraiser doesn’t hit the number, they don’t work. The fundamental relationship between an appraiser and those who employ them guarantee it.
    My first potential client, a broker, invited me to lunch prior to giving me an appraisal order. We went to a cheap greasy spoon where he opened the conversation with, “Our job is to help people. We get them the loans they need to get out of financial trouble. This means we must make the loans acceptable to the bank, no matter what”. I replied, “That’s fraud”. The broker smiles and says “That’s what real estate is. It’s good for the economy”. I paid for lunch. My first appraisal order from him dictated clearly that a value of $340,000 was needed to make the loan work. The comparables of the cookie-cutter tract home were identical and sold recently for $300,000. I appraised it as such and the broker threw a tantrum. After he cooled down, which took a few days, he came to me and demanded the pictures used in the appraisal. I didn’t give them to him because I knew he was going to forge his own appraisal. And he did. The loan was approved.

    -“I received an interesting article from Stephen G. Bishop, a former appraiser. I realized that appraisals were works of fiction long ago, but Stephen’s article took me by surprise I didn’t think the industry was as sleazy as he described. I sent his article on to a realtor for a second opinion. He assured me that, in his experience, Stephen’s The Truth About Real Estate was accurate.” -HousingDoom. Sept. 1, 2006
    -“good friend of mine is an appraiser 10/30 06:06:50
    -and based on what he told me – this article hits the nail on the head.” Craigslist (Housing)
    -Your article is dead on accurate 2006-10-30 07:09:06
    -No realtor with half a brain would ever lose a deal because a property does not appraise.
    Somehow, it always ends up appraising. It must be a friggin miracle !

    -Hi Stephen,
    I just came across your 2006 response to the WSJ article…!! You nailed it right on the head! I have been struggling for the past 5 years with the unprofessional, misleading, abusive practices of the “world of appraisal”. Anyway, just wanted to let you know that I greatly appreciated this—concise, well-written and credible (something rarely seen in this business). I have a BA in Urban Planning, 20 years of experience in economic development and commercial real estate, and don’t have enough credibility/experience to apply for the Certified General License. It appears following the rules (and the “new rules” at that) makes me a “less than worthy” candidate. Anyone who asks me about getting into appraisal is going to get your information. (Got any reprints? ;-).
    Although it was a painful reminder, I did get a laugh or two out of it….thanks!!
    Ann Marie Coscia
    Residential & Commercial Appraisals
    PO Box 863
    Severna Park, MD 21146

  30. Judge,
    I am anonymous from Atlanta, as much as I need to remain Anonymous, please tell us what part of the USA you are from?
    I have so much more to say, but can’t until we go to GANDUSDC!!!!

  31. Hi Alina:

    Actually, it’s pretty easy to prove!

    “The appraiser would just state they performed their services in compliance with state regulations and used comps within the same area as your house.”

    They can “state” anything they want, and they do, but that’s where the federal crime is committed, if they didn’t!

    That’s where we come in to prove they didn’t!

  32. Alina, yes indeed but if it is … And once in a while those lying cheatin sons of guns get brought down. So we try

  33. Although I strongly believe appraisal fraud existed in grand scale, the question is “How do you prove it?”

    The appraiser would just state they performed their services in compliance with state regulations and used comps within the same area as your house.

    I know, from working in eminent domain, which is an incestuous area of law, that comps can be manipulated (the same appraisers performed appraisals for the condemning authority and the landowner – although not on the same parcel). But to take that and make a claim for appraisal fraud is very difficult.

  34. i am with “Anonymous from Atlanta” 🙂 3 cheers!

  35. My Turn,
    In Oct 2005 Appraised value from wamu 450,000.00 drive by, now in October 2006 = 977,000.00. Thought I hit the Lottery, sure had me fooled. I purchased this Homestead on 12/12/1988 (129,900.00), and have title dating back to 1831 (the original 40 acres from the “Georgia Golden Lottery”). I have chain of Title with the exception of from like 1930 something to the person I bought from who held title 11 years before me. That would make it 1977, so for forty years I would have to dig at the Recorders clerk of the county I live in. Now my point, I have paid and lived here since 1988, and had unclouded title until Countrywide’s last re-fi in OCT, 2006. now their could be claims from 5 different bank subsidies.
    Recontrust N. A. was owned by Bankster’s of America before BOA swallowed . and I have been affirmative, so as to through a monkey wrench in their gears, they can’t 4close because of a little USDC suit before I stopped paying. Now no one wants to claim my property and we go one more month into the abyss. Ain’t this country Great!!!!!!!! So if you do the math The appraisal, (the value increased 43,916.40/ month 1,463.88/ per day, 60.99/ per hour for 365/24/7.) I am not b……ting you. I have all the Doc,s. I am pissed. And you should be to, I do not want to move and I will defend this property until justice is found!
    Appraisal’s like this
    So all that equals Hyperinflation and I do not have a grip on Hyper-deflation, but can only imagine. My Heloc only stayed open for 15 months then suspended. Then My Business line closed by Wamu and then here I am now, no business,lots of unpaid accounts and the thing I most look for every day is a post from
    “Neil Garfields”. When I am able I will donate to the cause and most of all, I would like to personally shake His hand, I so admire this man and the cause which he represents all of us who read this work, I hate to call it a blog, so I don’t. I look forward to my day in court. (motion to stay pending bla bla bla Jan. 2010.)

  36. The whole community was develper with outright fraudulent guiding principle to Jack up artificially the WHOLE community we are talking a multibillion follar developer who falsely advertised by creating a waiting list for properties when there was no increased demand unreality just the illusion of and each new Phase would go up and up in value as did their own comps where their own ” lender” made sure that their hand picked appraiser came in with the desired numbers which indeed looked very convincing at the time since the comps were from the whole hyperinflated community. The appraisers knew that they were bending ethics and stsndards for practice of their profession but they were promised more work and it’s well reported all over the Internet by those appraisers who did not bend that basically did not get to feed their family but instead made a different living. I commend those people thankyou those people

  37. Tammy B
    pls contact me -I had Home123 and NCM too

  38. Appraisal fraud was rampant, we find appraisal fraud on a national basis in four out of every five mortgage transactions we examine; in the foreclosure capitals such as Az., Ca., Fl., and Nevada virtually every time.

    It was not so much the lender, as it was the brokers who were trying to make commissions that were pushing appraisers “to get the number.” Notwithstanding, the lenders are still liable.

    Moreover, most don’t realize an appraiser commits a federal offense when he certifies his appraisal.

  39. Similar thing for me. It took 3 months to close, they frauded al the doc’s, and it “took 3 appraisals to get the number we needed” brokers words.

  40. I do have to comment on this. In our situation, the appraisal used the ‘right number’ to benefit the lender. Home 123 used an ‘in house’ appraisal company to appraise our home. We were buying a home we had lived in /rented for 5 years. Purchasing for 80,000. NOT a single home had sold for under $100,000 in the neighborhood in over two years, yet our appraisal came back at 95,000. The difference bumped us to only ‘15,000’ in instant equity instead of the 20,000. Thus we didn’t have the 80/20 we were aiming for. This little in house scam caused us to be pushed into a 2/28 ARM instead of the 30 yr fixed we were quoted figures on. We were told “it’ll only change your monthly payment by about $35.00/mo.” The ARM was never fully explained because we were encouraged to call and refinance in 1.5 yrs to avoid the adjustment. I wanted another appraisal done but was advised (by them) not to only because it will delay closing for up to 2-3 months. They knew we wanted to close before December. We were played… we later found out that the appraisal co., Home 123, New Century mortgage, and the Title company were all tied together. They’ll do what benefits them and not what’s best for the borrower.

  41. Now this is an excellant response that can be used against the false appraisal.

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