A fraudulent appraisal "can lead homeowners to borrow more money than their homes are worth, putting themselves at risk of being 'upside down' in a home -- e.g. not being able to sell for a high enough price to pay off their mortgage," according to a briefing paper on appraisal fraud put out by Demos, a New York-based think tank. That same research paper found that up to half of all real estate appraisers nationwide have reported feeling pressure from lenders or brokers to push up their price predictions.
"This whole run-up in prices has been fraud-driven, it's got very little to do with supply and demand," Bishop said. "Nine out of 10 deals are fraudulent, and any successful real estate person has an appraiser in their hip pocket who will give them any figure they want."