Something known as "appraisal bumping" has been around in the real estate business for years. Basically, this happens when the Appraiser agrees to increase the value of the appraisal.
So, the question is, "When does 'appraisal bumping' become an ethical and/or illegal matter?"
The guideline is typically, the appraisal opinion must be "reasonably supported" by fair market values. This "evidence" can be supported by a CMA (Comparison Market Analysis).
And while this definition is fine and dandy, that still leaves the question open as to whether a true valuation can be supported by the necessary comparison values. In my opinion, so long as the valuation is "reasonably fair and accurate" and the appraisal will support additional valuation, then the matter is probably acceptable.
It's also important to understand that there is an "appraisal review committee" that works at most banks. If an appraisal seems "overvalued" the committee will review the matter and render a decision based on its own findings. These findings may also incorporate a "Broker Price Opnion" (BPO) in order to substantiate whether the valuation is fair or not.
It is illegal and unethical to overvaluate a property. This typically can happen when an overvaluation is is extreme, unreasonable or unacceptable. That's usually when the trouble can start for an appraiser, buyer and loan officer. HUD, the FBI, Banking Investigators all start looking into these matters.
My recommendation is don't get carried away with bumping - just make sure you and your appraiser are keeping things reasonable.
Michael Hathman
VP - Smart Solutions Financial Services, LLC
888-955-3340 - Toll-Free
www.SmartSolutionsCreditRepair.com
Info@SmartSolutionsFS.com
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