Minneapolis has had a hot housing market for years. Nowadays, buyers can expect to spend more than the national average on a home in the Twin Cities. With housing prices increasing by more than 7% in the last year, buyers may also pay a premium to secure their dream homes.
Because of the comparatively high cost of houses, many buyers must secure financing. Of course, banks are not likely to loan any buyer more than a home is worth. To ensure the home’s value is realistic, mortgage companies turn to licensed appraisers. Collusion with either the lender or the buyer, though, may put at an appraiser’s license at risk in three ways.
1. Prioritizing the interests of the lender
To reach a meaningful figure, appraisers must consider the home, comparable sales and the real estate market. Regardless of the appraisal the lender wants, these factors remain the same. If appraisers prioritize the interests of the lender and come up with a figure facts do not support, they may face professional discipline.
2. Doing the work of the buyer
Not only must appraisers work independently of lenders, but they must also not unfairly advocate for the interests of the buyer. Still, buyers often need appraisals to cross a specific threshold or to fall within a precise range. Fudging an estimate to make it align with the buyer’s interests may be unacceptable.
3. Working outside the appraisal management company
Since the passage of the Dodd-Frank legislation, lenders must use an independent appraisal management company to find appraisers and secure appraisals. If appraisers help lenders or buyers skirt this requirement, their licenses may be on the line.
While appraisers do not commonly engage in impermissible collusion, the boundary lines are not always clear. Ultimately, even if appraisers try to behave legally and ethically, they may inadvertently face a loss of their licenses.