Appraisal Fraud

AAA

DEFINITION of 'Appraisal Fraud'

A form of mortgage fraud, whereby the value of a home is deliberately appraised above its market value. The overstated value obtained through Appraisal Fraud is commonly used to:

  • Help a seller get a better price than the market would warrant
  • Help a buyer get financing because the mortgage amount could be much less than the appraised value of the home
  • Help a homeowner get a preferable refinance, or home equity loan

Appraisal fraud can occur when an appraiser is in on the scam, and dishonestly overstates the value of the property. It can also occur when the homeowner, seller or purchaser physically alters an "honest" appraisal using methods such as digital editing.

INVESTOPEDIA EXPLAINS 'Appraisal Fraud'

Appraisal fraud, is one of the most common types of mortgage fraud. To protect themselves from this, banks will often set up the appraisal themselves when doing a mortgage or refinance. Homeowners and prospective homeowners should be just as careful, and make sure that they have an independent second opinion whenever they are going to make a decision based on somebody else's appraisal.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Appraisal Approach

    A procedure for determining an asset's value. The appraisal approach ...
  3. Medicare And Medicaid Fraud

    Illegal practices aimed at getting unfairly high payouts from ...
  4. Occupancy Fraud

    A type of mortgage fraud, whereby the borrower lies about whether ...
  5. Appraisal

    A valuation of property (ie. real estate, a business, an antique) ...
  6. Restatement

    The revision and publication of one or more of a company's previous ...
Related Articles
  1. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  2. 10 Tips For Getting A Fair Price On ...
    Home & Auto

    10 Tips For Getting A Fair Price On ...

  3. Avoid An Audit: 6
    Retirement

    Avoid An Audit: 6 "Red Flags" You Should ...

  4. Home-Equity Loans: The Costs
    Options & Futures

    Home-Equity Loans: The Costs

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center