Appraisal Fraud

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.

BREAKING DOWN '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. Qualified Appraiser

    An individual who has earned an appraisal designation from a ...
  2. Appraisal Management Company - ...

    An independent entity through which mortgage lenders order residential ...
  3. Appraisal Costs

    A specific category of quality control costs. Companies pay appraisal ...
  4. Appraiser

    A practitioner who has the knowledge and expertise necessary ...
  5. Performance Appraisal

    An annual review of an employee’s overall contributions ...
  6. Air Loan

    A mortgage fraud scheme in which a mortgage broker invents a ...
Related Articles
  1. Personal Finance

    What You Should Know About Home Appraisals

    Home appraisals are an unbiased way to determine a home's value. Here is what you need to know about obtaining one.
  2. Home & Auto

    What You Should Know About Home Appraisals

    The home appraisal is a key part of any loan-closing checklist. It’s an unbiased professional opinion of a home’s value.
  3. Options & Futures

    6 Tips For Protecting Your Home's Value

    New taxes, property values, appraisals, community changes and nearby abandoned foreclosures can all lower your home's value. Take proactive steps to protect it.
  4. Credit & Loans

    Guidelines for FHA Reverse Mortgages

    FHA guidelines protect borrowers from major mistakes, prevent lenders from taking advantage of borrowers and encourage lenders to offer reverse mortgages.
  5. Credit & Loans

    6 New Hurdles For Home Financing

    There are many challenges to financing a home. Find out which ones are especially problematic right now.
  6. Home & Auto

    Retiring and Selling Your House? Price It Right

    When selling a home, retirees need to make sure they price it right. List it for too much and it could languish, eating away at retirement income.
  7. Home & Auto

    Reverse Mortgage Pitfalls

    Before tapping your home equity, find out what can go wrong.
  8. Home & Auto

    How to Price Your Home Like the Pros

    Selling a house without using a realtor can be a difficult task. Thankfully the internet has made it easy to list a home like the pros do.
  9. Credit & Loans

    How Regulations Protect Reverse Mortgage Borrowers

    They're complex animals, which is why there are government guidelines in place to protect borrowers.
  10. Credit & Loans

    Buying A Home: Go Through The Escrow Process

    By Amy FontinelleOnce you're in escrow, you're in the home stretch, but what a long stretch it is. The days until you get the keys to your new home can't go by quickly enough, yet ...
RELATED FAQS
  1. What is accounting fraud?

    Learn what accounting fraud is, why a company commits account fraud and some types of accounting fraud that misrepresent ... Read Answer >>
  2. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
  3. What are the best ways to pay off my mortgage quickly?

    Learn how mortgage payments may be reduced and how to save thousands on mortgage loans by lowering the interest and principle ... Read Answer >>
  4. How do I know if I should refinance my mortgage?

    The typical rule of thumb is that if you can reduce your current interest rate by 0.75-1% or higher then it might make sense ... Read Answer >>
  5. An appraiser forms the following estimates for a rental property ...

    Free info on financial certification exams including study guides, exam questions, and much more! Read Answer >>
  6. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center