Yeah of course, the appraiser is a person who is paid to write down the predetermined number. The US federal government should nuke this industry as part of their crackdown on "junk fees". Either the appraiser serves a legitimate arms-length purpose or their whole line of business should go away.
I think it's really a problem of different incentives.
Somebody (A) at the bank does not want to give out loans that are well beyond a properties value.
Somebody (B) _else_ at the bank is actually the one giving you the loan and makes money from you getting it.
So A requires B to have an appraiser so they can't completely run away writing loans. From talking to some real estate agents, the appraiser will only fudge so much for you. An appraiser might agree that the house is worth 750k even if they actually think its 699k but if you try to get a 700k loan for a 350k house they'll write down 350k in their appraisal.
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IIRC, the government's crack down on "junk fees" is mostly that you can't advertise a price and then inflate it later with fees. So as long as the bank states that they require an appraiser and their in-house cost is $X; it doesn't count as a junk fee. But if the bank says that the loan is going to cost say $5k in overhead and then later says it doesn't include appraisal fee then it be a junk fee.
> An appraiser might agree that the house is worth 750k even if they actually think its 699k but if you try to get a 700k loan for a 350k house they'll write down 350k in their appraisal.
This is kind of the point. The appraiser isn't trying to find the "true value" of the house, otherwise buyers would hire appraisers prior to even offering a bid.
The question that the bank wants answered is, "is this house sufficiently matched to loan amount such that if the borrower defaults, the house can be sold for enough money to recoup the loan?"
And if the answer is "yes", then they write down the number.
I could see a third option as a "lemon detector". That is, instead of their output being a number, it would be a binary, intended only to limit downside risk in the worst cases.
I think in practice this is indeed the role they play. If I'm "overpaying" by 20%, the appraiser will probably still "write down the predetermined number", but if I'm overpaying by 100% and taking out a mortgage to do it, there's a pretty good chance that the bank's appraiser is going to sink that deal.
That's basically what they do, they're not to find the actual value of the property (that's more properly a tax assessor, perhaps) - they are there to make sure the valuation is "in the ballpark" to what it would liquidate for.
An appraiser will never get in trouble if a bank forecloses on a $500k property and it sells for $450k or so, but they will get in trouble if the $500k property only sells for $200k - they'd need to explain why.
Appraisals function as a major fraud reducer, especially for internal fraud.
Appraisers will fudge $100k on the value of a $1m house because that's their opinion as an appraiser. They won't fudge $1m on the exact same house (2x value).
That serves as a kind of cap on funny business to some extent. 10% of the value isn't going to make that much difference on the ability to pay for most borrowers so an excess $100k in the valuation doesn't really matter anyway. As long as appraisals don't get too out of line they serve their purpose.
