Thread: I want to inflate appraisal values

From another perspective;

As a homeowner, would you buy a home for more than its market value if the seller wrote you a check for the difference, and the two houses on both sides of you were sold in the same way and enjoy a high, validated appraised value?

They put people in jail for doing what you propose to do. This is called loan fraud and it is a federal offense, so if they get suspicious it will be the FBI who comes snooping around your financials.

Please make sure any buyer that you propose this scheme to understands the risk you are asking them to take.

One word for you
[COLOR=black][FONT=Verdana]ponzi
Just using your money instead of the investors at first to inflate the value now, that will not be sustainable if they decide to sell later. Just because your townhomes sell for x value doesn

With recent new lending rules, the buyer doesn't even get to pick their appraiser anymore. So a buyer has to pay nearly twice as much for an appraisal and they don't even know who will do it. Usually goes to the lowest bidder.

An appraiser would be done if they appraised a $330k property at $400k.

All that said, I don't think what you want to do is possible unless you sell to investors who have their own private money to buy with and don't care about appraisals. If your buyers don't have to get loans, then that opens up all options and I believe rules out any fraud as mentioned above.

If you get a smart appraiser for other homes in the area he will make an adjustment for this on Comps.

Try renting some out at inflated rental prices and get the appraisal based on the lease value.

I would be extremely careful, as it sounds like what you're trying to do is conspiracy to commit loan fraud. I would check with your lawyer or see if your Realtor association offers free legal counsel before getting to far into it. Better to be bankrupt than in prison!

I think you need to read your post again. You know the answer.

Originally Posted by Psychoknight

We are first-time developers and face default on a new buildout on 20unit luxury townhomes because the current appraisal is 330k/unit (which is our build/land cost). The units need to appraise for 400k to establish enough equity for the construction loan to be refied into a permanent loan.

I would like to sell off 5 units at $400k by assisting the buyer with $50k ($70k if nobody's interested) in order to establish appraisal value for the remaining 15 units, to get a loan for the remaining units. Buyer of these inflated value townhomes would put down 70K (20%) & we contribute 50K free money. This isn't a completely artificial inflation as we are writing a check w/ hard cash for the amount which we wish to inflate.

From the lendor's risk perspective, even if the house were to liquidate at the low-ball appraised value of 330k, there exists a 36% cash equity in the home (120k down for 330k liq. value) - the lendor has a huge cushion to avoid loss in foreclosure.

Everyone's covered, nobody's hurt. Its scheming, but for the good of all, if I'm right. Its ethical if no one suffers, yes?

Yes, prop taxes will be higher (1k more per year), but the buyer has huge equity and a near-guarantee of high resale value due to both the 5 units, and the other 15 units we will refinance to keep for ourselves.

What do you think?

You could go to jail for this.