In San Diego, Stephen G. Bishop, turned his appraiser's license back into California's Office of Real Estate Appraisal after being fired thrice consecutively because he refused to inflate residential real estate appraisals.
"The shopping center appraisal schools do not disclose the fact that a trainee has no defense... and he either joins Pancho Villa and his gang or puts the license in the drawer and writes it off as a bad experience," Bishop said.
Jennifer Warburton, a real estate broker in Orange County, NY finds that most list prices on homes don't square with appraised values.
"I see deals die constantly because listing agents are pricing houses according to a supposed market increase. I am livid at the state of the market in my area... and, in my opinion, it will lead to an area-wide crash in the next two or three years if something doesn't change," Warburton said.
In Spokane, WA, U.S. District Judge Robert Whaley sentenced appraiser John T. Hansen to 18 months in federal prison, sentenced him to repay $287,796 to real-estate fraud victims and sentenced him to three years of supervised release after his prison term ends.
Hansen, who operated his own appraisal business, was convicted of inflating appraisals on homes, purchased by vulnerable buyers, in a mortgage scheme that ran from 1997 to 2000.
Hansen isn't talking.
Appraisal fraud, caused by pressure on appraisers and by criminal activity, is rampant and poses a risk to the American Dream of home ownership for individuals and to the nation's economic well-being.
What's more, it's likely greater than numbers show.
Reaction has been swift and telling after a recent "Home Insecurity: How Widespread Appraisal Fraud Puts Homeowners At Risk" report released by public policy think tank, New York City-based Demos .
The study said more than half, 55 percent, of all appraisers have reported feeling pressures from lenders or brokers to overstate property values.
"This needs to be qualified in terms of the type of client. The number is closer to 100 percent when only brokers or loan officers are considered clients," said Bishop who says the problem is a sore the regulatory process allows to fester.
"The regulation of the appraisal industry can only be described as engineered to facilitate fraud, full of convenient loopholes, intentional lack of enforcement resources, and carefully designed conflicts of interest. Until, the top of the food chain is re-engineered by an impartial party, the fraud will continue to escalate," says Bishop embittered about being pressured out of the industry.
The industry concedes, appraisers who practice the science of determining the value of a home are too often under pressure to set the value of a home at over inflated levels. Often that's because, in markets with small supplies and high demand, transactions driven by multiple offers push prices up into the stratosphere.
While some say a home is worth whatever the buyer is willing to pay, others argue what a buyer is willing to pay isn't a mandate for setting value. Let them come up with the difference if they are so willing to pay more than a home is worth.
Too many over-valued homes that suddenly plummet in value, much as they did in many markets during the late 1980s, can send local economies in a downward spiral as home owners are sucked into the vortex of negative equity.
To help ease the pressure on appraisers, the industry's trade group the Appraisal Institute has set up a complaint center to give appraisers somewhere to direct complaints to the appropriate federal and state regulatory agencies.
The Appraisal Institute's lobbying efforts have also created greater awareness among regulators. Earlier this year, the Office of the Comptroller of the Currency issued new guidance making clear that engaging in a practice of influencing the independent judgment of an appraiser would violate the law.
But then there's greed -- which knows no bounds.
More and more often, a growing real estate underworld is discovering there's money to be had in real estate and an unprecedented level of organized crime has surfaced.
The Federal Bureau of Investigations says methods vary but the racketeers often uses inflated appraisals on properties distant lending companies never see. Often a conspiring group of insiders -- lawyers, appraisers, mortgage lenders, title and escrow workers, mortgage brokers, and real estate agents -- get a mortgage for more than the actual value of the property and then walk off with the difference. The FBI says 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders.
"State appraisal agencies have ludicrously small staffs and budgets, indicating that there was never any intent to police the industry from within," says Bishop.