Even though new federal rules prohibit appraisers, realtors, and individual home sellers from tweaking home values higher, an article by Kenneth Harney in last Sunday's Chronicle implies that inflated appraisals are still the norm.
The housing boom came into being in large part because of a faulty appraisal system--one in which the people selling or providing capital (those who stood to make the most profit) had the most control over price tags. This system resulted in skewed home values that influenced prices everywhere. The most pressure on appraisers comes from lenders, who want to make sure home values will be set at a price that limits their losses. New laws threaten severe punishments for appraisers who buckle---in some states they can lose their licenses, and the secretary of housing can even impose financial penalties on appraisers found guilty of inflating values.
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