February 28, 2006

Bogus inflated appraisals? SHOCKED! Shocked I am!


The congressional hearings will have to address this big-time. Appraisers everyone knows are the puppies of the realtors (who spiff them) and the mortgage bankers (who get them their business)

The system was cooked to force these guys to "hit the number". Well, who got screwed? Not the realtor, not the banker, and not the appraiser.

The homeowner. Big time. Even if he doesn't know it (yet). He's still out buying Hummers with his new refi wealth (oops!)

A go-go real estate market is partly responsible for the inflated appraisal epidemic that gives consumers a false sense of their home’s worth. One disastrous result: mortgages and refinanced loans that exceed the value of a home and create crushing debts that can take years to pay off or lead to foreclosures.

Annie Lewis knows what that feels like.

“It’s a very sick feeling,” said the Lee’s Summit woman, who fears losing the recently built condo she bought in 2003 for $94,000.

In 2004, she responded to an Ameriquest TV ad to consolidate her debts by refinancing her home. She was delighted when an appraiser sent by the company valued her condo for $129,000 — a 37 percent leap in value in little more than a year. She paid off bills and settled for a 7.7 percent adjustable rate mortgage.

But it was too good to be true. This past year, six lenders rejected her efforts to get a new, fixed-rate loan to keep her interest rate from rising. All said her condo was overvalued and is only worth $108,000.

Appraisers said the problem began to grow with the housing boom and low-interest rates that spurred aggressive loan brokers to encourage consumers to refinance their loans. The carrot dangled in front of consumers — in thousands of direct-mail campaigns, TV commercials and Internet ads — is freed-up cash to consolidate debts.

But to make such high-dollar loans pass muster with underwriters, unscrupulous loan brokers chasing big commissions pressure appraisers to meet predetermined values. In other words, artificially inflate the value of the homes to justify the costlier loans.

25 comments:

Philip John said...

haha

HILARIOUS

I especially love the one about the guy who spent $1M on 17 houses without bothering to look at all of them!

I love stupid people.

At that girl - she pays $94k, it goes UP to $108k and yet she is still in danger of losing the house! ...sounds like someone has been refinancing to buy expensive jeans and not making mortgage repayments.

naughty naughty.

Anonymous said...

I agree with Philip John. People need to take responsibility for their actions. I recently bought a condo (to actually live in believe it or not) and had trouble with the appraisal coming in high enough. I knew I was buying on the high side and I knew the appriasal deal is a scam to get the loan to work. My broker told me they need to find "the right appraiser" - Hell I was HOPING they would find the right one because I wanted that number to be high. This woman in the story wanted the same thing - and now she is surprised to hear its coming in lower.

If you don't realize the real estate market is a game then you shouldn't be buying real estate.

Also, how can anyone truly appraise real estate in the market we recently experienced. With things going up so fast the true appraisal is really whatever someone will buy it for. The whole idea of appraising something in this recent bubble market is a joke and its to be expected that people get hurt on the down side.

Anonymous said...

Wouldn't have been a problem if she locked in the rate at time of the refinance.

It is unfortunate about the reality of the appraisal process. It is true that most banks start with a number in mind and ask the appraiser to find recent comps that might lend credence to it.

I have only heard one instance of a bank not approving a loan based on the appraisal being far lower than the agreed sales price. It broke the deal. That is the only time I have seen an appraiser look out for the buyer.

moman said...

I've been to Lees' Summit before; and quite frankly, I don't understand why ANYONE would buy a condo there.

It's a less-desirable Kansas City suburb with plenty of cheap single-family houses. Paying $95k for a condo there is akin to paying $56,000 for a Hummer H2 when gas prices are $3/gallon. It just doesn't make sense any way you look at it.

Kansas City didn't even have a real-estate boom....the prices there have barely kept up with inflation.

moman said...

I've been to Lees' Summit before; and quite frankly, I don't understand why ANYONE would buy a condo there.

It's a less-desirable Kansas City suburb with plenty of cheap single-family houses. Paying $95k for a condo there is akin to paying $56,000 for a Hummer H2 when gas prices are $3/gallon. It just doesn't make sense any way you look at it.

Kansas City didn't even have a real-estate boom....the prices there have barely kept up with inflation.

Anonymous said...

whats with the Barbie Hummer?

keith said...

people buying stupid things like barbie hummers with their cash out refi money

how else could someone justify a barbie hummer, unless it was free money

or they're complete idiots

or both

Anonymous said...

what happens if you walk away from your house or rental prop that you took all the equity out?

Anonymous said...

what happens if you walk away from your house or rental prop that you took all the equity out?

keith said...

anon - you F the bank, and you F your credit. But you keep the barbie hummer

it's the banks fault for loaning you the money at the bogus appraisal amount

then the bank sues the appraiser company perhaps

and watches you drive around in the barbie hummer they bought you

arizonadude said...

I wouldn't be caught dead in or near that ridiculous barbie hummer. Is that thing for real?

Anonymous said...

I wouldn't be caught dead in ANY Hummer, much less a Barbie faggety one.

brokersleaveyoubroke said...

Anon, if you walk away then the bank will forclose and sell the property. If they sell it for less then you owe then it's called a shortfall and they will send you a bill for the amount of the mortgage not covered by the sale. They will then persue you for that money until you pay or go bankrupt. Isn't it funny how congress just happened to change the law to make it very hard to go bankrupt.

Anonymous said...

If you did not refinance, your original mortgage was a "purchase mortgage" -- which in some states can prevent the bank from recording a judgement against you. Unfortunatley, in such cases they have the option of "forgiving" the debt -- which results in a 1099 that the IRS will hound you for tax on the money you were allowed to keep.

john s said...

"Isn't it funny how Congress just happened to change the law to make it very hard to go bankrupt."

Why do I suspect that the new bankruptcy law will be the final insult that ends the Republican majority?

john s said...

"Isn't it funny how Congress just happened to change the law to make it very hard to go bankrupt."

Why do I suspect that once bad times arrive, the new Bankruptcy law will prove the final insult that ends the Republican majority?

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