Appraisers Pressured to Inflate Home Values as the Real Estate Market “Softens”

With home prices falling–or at least slowing down–real estate appraisers are facing greater pressure to overstate home values. The pressures come from all sides, but this is not really new. The pressure may be great now, but it has always been there. The greater the home price, the higher commissions will be, the more interest will be recovered by lenders, etc. With sales slowing, it becomes more and more important for those parties to increase the value of each sale.

A greater appraised home value, of course, does not mean that the home is worth more. It means that the happy new homeowner is stuck with a loan greater than the amount they can expect to recover on sale. If this trend is truly occurring, then it does not bode well for the housing market in years to come.