What Is Appraisal Fraud?

Appraisal Fraud Explained in Less Than 4 Minutes

A family stands inside a home.

Halfpoint Images / Getty Images

Appraisal fraud occurs when the price of a home is deliberately misstated during the appraisal process. The licensed appraiser will dishonestly state that the home is worth either well above or well below its fair market value.

Appraisal fraud can cause serious problems for both borrowers and lenders. It’s important to recognize the warning signs of appraisal fraud so you don’t get stuck in a bad financial situation.

Definition and Example of Appraisal Fraud

Appraisal fraud involves intentionally misstating the value of a home. This often happens when licensed appraisers purposely understate or overinflate a home’s worth.

For example, an appraiser may be pressured by a lender to inflate a home’s value so the buyer’s lender can earn more in fees from a home sale.

How Appraisal Fraud Works

Buying a home is a significant investment, and you want to know you’re paying fair market value for the property. That’s why homeowners turn to licensed appraisers. These individuals are responsible for inspecting the property, completing a report, and stating what the home is worth. By the rules of their profession (Uniform Standards of Professional Appraisal Practice) and federal and state law, they must remain objective and independent.

Appraisal fraud occurs when an appraiser deliberately misstates the value of a home. This can happen when a homeowner or lender asks the appraiser to intentionally inflate or deflate the home’s value in a way that benefits the homeowner or lender.

Appraisal fraud might be used to help a seller make more money from the sale of their home. In some cases, an inflated appraisal may help lower the mortgage’s loan-to-value ratio enough to where the lender can approve the borrower’s application. While the lender earns more on fees and interest from a higher sale price, the borrower is misled as to what the actual value of the property is. In the past, lenders have threatened appraisers to inflate property values or risk losing business from that lender in the future.


Appraisal fraud accounts for around one in 10 cases of mortgage fraud.

The best way to avoid appraisal fraud is to identify it before it happens. Make sure you hire an experienced appraiser, ask a lot of questions, and stay vigilant during the appraisal process. If something seems off about an appraisal, you can ask the appraiser for clarification.

What To Do if You Suspect Appraisal Fraud

There are multiple resources you can use to report appraisal fraud. A key national resource is the Appraisal Complaint National Hotline, which is a federally run program that takes complaints and refers them to the right legal authority. Once you submit your complaint, you can also report fraud to the Federal Trade Commission, and the Task Force on Market Integrity and Consumer Fraud’s complaint sites.

Additionally, if you suspect fraud, you can report the appraiser to state-level agencies. Start with your state’s appraisal regulatory agency. Also, you may be able to file a complaint with your state government. For example, if you believe you’ve encountered appraisal fraud in New York, you can file a complaint with the New York Department of State, which oversees licensing of appraisers.

If you believe you’ve received an inaccurate appraisal, you may want to get a second opinion. You can have the appraisal performed by a different appraiser, who may assess the property at a different value.


Homeowners who are black have historically faced biased appraisals when selling or valuing their homes. Homes in Black neighborhoods are undervalued by $48,000, on average. If you suspect you are the victim of a biased appraisal, contact the Department of Housing and Urban Development’s Fair Housing and Equal Opportunity division, as well as the Consumer Financial Protection Bureau.

Appraisal Fraud vs. Appraisal Negligence

Appraisal Fraud Appraisal Negligence
An appraiser deliberately overinflates or deflates a property’s value The appraiser doesn’t exercise the level of care required to appraise a property correctly
The inaccurate appraisal is an intentional effort to mislead the borrower The inaccurate appraisal is a mistake often resulting from carelessness

Sometimes, an inaccurate appraisal is the result of fraud, but it can also be caused by negligence—the appraiser doesn’t go through the correct process required to properly appraise a home. The appraiser may rely on outdated sales comparisons or overestimate the cost of certain features.

Key Takeaways

  • Appraisal fraud occurs when the price of a home is listed either well above or well below fair market value.
  • Appraisal fraud typically happens to either improve a buyer’s financing position or help a seller make more money from the sale of their home.
  • Lenders can also coerce appraisers to inflate property values or risk losing their business in the future.
  • An accurate appraisal can also be the result of appraisal negligence—the appraiser didn’t use the level of care required to correctly appraise a property.
  • If you feel you’ve received an inaccurate appraisal, you can either ask for a second opinion or contact an experienced real estate attorney.

Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. The Appraisal Foundation. “A Guide to Understanding Residential Appraisal,” Page 6.

  2. National Consumer Law Center. “Comments to the Federal Reserve Board  [Regulation Z; Docket No. R-1394] 12 CFR Part 226: Truth in Lending,” Page 9.

  3. First American Data & Analytics. “Biggest Mortgage Fraud Red Flags.”

  4. Brookings Institute. “Know Your Price: The Devaluation of Residential Property in Black Neighborhoods,” Pages 1-2.

  5. Sackrin & Tolchinsky, Attorneys at Law. “Appraiser Fraud and Negligent Appraisal Claims.”

Related Articles