Inflated Appraisal

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FLORIDA REAL ESTATE SALES ASSOCIATE COURSE

Types of mortgages

Section 61 of 72

One of the most significant red flags in mortgage fraud is an inflated appraisal. This occurs when an appraiser colludes with a loan officer, seller, or buyer to value a property significantly higher than its actual market worth. The goal is often to help the buyer secure a larger loan amount than the property justifies, sometimes to allow the seller to kick back cash to the buyer at closing (a "silent second" mortgage) or to generate instant "equity" that does not exist. If a property is appraised for much more than comparable homes in the immediate neighborhood without a clear justification, it is a major warning sign.