fraud (frôd)
n.
1. A deception deliberately practiced in order to secure unfair or unlawful gain.
2. A piece of trickery; a trick.
3.
a. One that defrauds; a cheat.
b. One who assumes a false pose; an impostor.
After seeing what is going on in the appraisal and lending part of the Real Estate industry right now, I thought about looking up this word.
I wonder if using bad comps in the same neighborhood that are foreclosures and do not represent the home being appraised fits the first definition. Looks like it to me. If appraisers are using, let's say a 1985 Chevy Impala with body damage that has been abandoned for at least a year. It also needs tires and license plates. By all means it is a perfect car to figure the value on a showroom new 2009 Chevy Impala with zero miles. Sounds insanely stupid right? Well that's what we do for a home these days. No allowances are made for age or the fact that comps are foreclosures or short sales. This is fraud, plain and simple. If an appraiser or a lender fudges the value up they would be charged with fraud in a heart beat. But ripping the bottom out of the market is ok? Lenders have their own rules for appraisers, further limiting values. That fits the second definition nicely I think.
In order for stimulus to work and work properly, everyone involved needs to be on board and adhering to the same set of standards. The $8000 tax credit has been a dismal failure because no set of standardized practices or participation was put in place. Banks are shoring up their balance sheets and yet property values are continuing to tank. Sounds like definition 3A to me.
And of course we all know who 3B is by now.
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