The danger of appraisal inflation is not apparent to many consumers.
The consumer begins to believe the inflated value as valid and it is validated each time the property is over-appraised. When its time to cash out, the fall from the clouds can be unforgiving.
But problems arise when the appraisal is higher than the home’s actual value. Such overvaluation can lead homeowners to overborrow. And later, when they resell, they could learn that the till they thought was full of money contains much less — or nothing at all.
At the end of the day, the homeowner just wants the job done. Herein lies the problem.
Its called “detached from reality.” The mortgage is not being done for the homeowner at all. Its being done on the lender’s behalf to assess the collateral. However, the typical lender sees the report only after it has been through the food chain.