Real Estate Council of Alberta Fundamentals Practice Exam

What occurs with an inflated appraisal?

1. The appraiser values property lower than its worth

2. The appraiser values property accurately

3. The appraiser values property higher than its worth

4. The appraiser does not conduct a visit to the property

The correct answer is: The appraiser values property higher than its worth

An inflated appraisal occurs when an appraiser values a property higher than its actual worth. This can happen for several reasons, including pressure from sellers or buyers who desire a higher valuation to secure better financing or to justify a sales price. An inflated appraisal can lead to issues such as buyers overpaying for properties, lenders providing loans that exceed the value of the property, and potential market instability. Accurate appraisals are crucial in real estate transactions to ensure fair value is assigned to a property, and inflated figures can create a false sense of security in a property's worth. Understanding the implications of inflated appraisals can help buyers, sellers, and lenders make informed decisions.