Every aspect of the real estate industry is highly competitive. Whether you are a loan officer or a real estate agent that represents buyers and sellers, you work hard for every lead and every sale that you complete.
High volume is not the only way to make a living working in real estate. Some professionals will also try to make as much per transaction as possible. Focusing on higher-cost listings and high-end buyers is one approach, as is maximizing each transaction. Getting as much as possible for a seller listing a property can both support the best interests of the client and slightly increase what you make on the sale.
Of course, while you may be able to find a buyer willing to pay a certain price for a property, you also have to find a bank willing to finance the transaction. Appraisals are a crucial tool to limit the risk that businesses take when they finance home purchases. Some of the things you might do with an appraiser could lead to allegations of mortgage fraud in the future.
Hiring appraisers based solely on inflated values is risky
Appraisers have to be able to support the value that they assigned to a property if challenged about their determination later. Most professional appraisers will try to protect their professional reputation by being cautious or even conservative in the value that they assign a property.
Choosing to hire an appraiser because they have a history of quoting higher prices might mean that your buyers can convince the bank to finance their transaction, but it could potentially lead to dangerous exposure for you.
If the buyer defaults on the sale, the bank may discover that the true value of the property does not reflect the amount that they financed. They will likely scrutinize loan paperwork and appraisals in that scenario. Hiring someone with a mediocre track record just because they returned higher prices on properties might incriminate you in the eyes of the lender.
Agreeing to a certain value is an even more dangerous practice
The value that an appraiser sets for a property should be an objective reflection of their observations of that property and other nearby sales. When the professional hiring the appraiser communicates with them directly and indicates what price range they need for the sale to go through, they put pressure on the appraiser to overvalue the property.
Sometimes, innocent behavior might look like mortgage fraud to a lender frustrated by a recent loss. Questionable appraisal practices could lead to accusations of fraud. You need to understand how banks might perceive your action when responding to allegations of white-collar crimes like mortgage/appraisal fraud.