BY BAILEY HARRIS

Although there are many honest appraisers out there, new data from the FBI indicates there may be just as many who inflated appraisals to devastating effect after being pressured by mortgage brokers and others in the industry.

Last year, 90 percent of appraisers felt pressure to inflate home values, according to a nationwide survey of appraisers conducted by October Research Inc. Most of the pressure came from mortgage brokers and real estate agents--two groups who depend on commissions to make a living.

In Florida, complaints against appraisers tripled over the last few years. Other states are seeing similar numbers. Even appraisers are trying to shine a light on the problem. The American Society of Appraisers and other groups have spoken out publicly against lenders and broker who cut corners and encouraged bad behavior during the boom.

The devastating effect of appraisal fraud can be seen across the country as more and more people lose their home to foreclosure. Paying inflated prices has come back to haunt homeowners who owe way more on their properties than they are worth and lenders who made enough bad loans to bring the finance sector to its knees.

New Standards for Appraisers

News standards have already been established in some sectors. There are also plans to create new laws and guidelines to prevent appraisal fraud.

The Office of Federal Housing Enterprise is currently working with the New York Attorney General's office to implement new appraisal standards for Freddie Mac and Fannie Mae. There is also a bipartisan proposal in the works to reform the appraisal process.

How much of a dent any of these efforts will make in the appraisal fraud problem is yet to be seen, but the measures certainly couldn't hurt.

Things Are Looking Up Already

I recently came across a blog post written by a real estate professional that claimed new appraisal standards are bringing home prices down.

He complained that new standards called for the VA appraiser to go back only three months when finding comparable homes. In his opinion, it would be better if the appraiser could go back to last year when comparable homes were selling for more.

What irked him most was that one of his clients was forced to reduce the selling price of a home and he was forced to lose out on commission all because a VA appraiser said the home was worth $232,000 not $239,000.

Now, I don't think Mr. Blogger is alone in his irritation. There are plenty of other housing industry workers who would probably like to see home prices propped up for their own personal gain, but the fact is homes aren't worth what they were a year ago.

I find it comforting that the appraiser could only go back three months, and I'm sure the buyer and the lender that were involved in this particular situation do to.

Furthermore, I hope the blogger is right about new appraisal standards lowering home prices. The cost of homeownership has been inflated for years and it is about time that it came down to more normal levels.