The AP reports that Ohio is being especially hard hit by a growing nationwide problem - inflated appraisals and collusion between appraisers and mortgage brokers. When borrowers need to sell a property appraised for more than its real value, and often with negative equity as a result, the homes often end up as REO where inflated appraisals contribute further to losses when used to set pricing.
Note to investors: This is why market knowledge and watching price changes is so important. Inflated appraisals are putting more and more REO on the market at 15-20% above true market value. Then, after 6-18 months on the market, a property reaches its third or fourth broker and second or third asset manger, they get serious about selling and often end up dropping a “white elephant” well below market value.
Report: Mortgage brokers, appraisers fueling foreclosure increases
Brokers and appraisers who profit regardless of whether loans succeed or fail are laying the foundation for foreclosures, the newspaper reported. And consumer advocates say lax state oversight is only building on the problem.
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