Housing Comes First

Appraisal Abuse

According to a June 13, 2005 article in the Buffalo News, appraisers are feeling pressure to inflate home value estimates. This trend is going to disproportionately effect families in rust-belt cities like Syracuse and Buffalo:

"...observers are now worried about what may happen in places with lower prices and slower growth, such as Buffalo, or when the perceived housing bubble bursts and prices drop. They say people would find themselves with less equity than they thought, unable to repay a loan, and unable to afford a down payment on a new home. "If people began selling their homes and found they didn't have at least the value they had originally borrowed, there would be severe problems," said John Taylor, president and CEO of the National Community Reinvestment Coalition, a fair lending group."

Also--these out-of-whack appraisals are the key to property flipping--buying a house low and selling for an artificially high price to the unsuspecting and the credit-damaged.

"In places like Buffalo, where prices are unusually low, such appraisals also are used to "flip" properties in low-income areas. That's where participants buy homes cheaply and then quickly sell them for significantly inflated values, defrauding the eventual buyer and possibly leading to foreclosures that hurt communities by leaving homes vacant."

posted by Phil @ 1:01 PM