These kinds of fraudulent transactions are becoming very common all across the country. The lender is left holding the bag.
I have recently seen a couple of properties in San Diego that were listed, had their listings cancelled or expired, and the properties then sold for 10-15% higher a few months later, at prices that could not be supported by the market, without being reported on the MLS.
Except in very rare/strange instances, an appraiser cannot legitimately appraise a property for 10% over the list price, especially when the property has been adequately exposed to the market. On the appraisal form, there is a section that asks if the subject property has been listed for sale in the past 12 months, and if so, the appraiser must give the details of the current or recent listings.
The only way a lender can get an appraised value of 10-15% over the list price is if:
A.) The appraiser is dishonest, plus an adequate appraisal review is not done by the lender, or
B.) The lender does not require an appraisal. There are a number of loans that are done without an appraisal. The lender does an “automated valuation”, with technology similar to Zillow or Cyberhomes.
I really don’t feel sorry for any lender that gets taken in a scam like this. If they’re that careless with their money, they deserve to lose it.
