After years of incredibly low prices and inventory saturation, the Michigan real estate market has finally bounced back. In fact, in recent quarters, the West Michigan and Grand Rapids real estate markets have ranked among some of the hottest and most lucrative in the nation.
Compared to other metropolitan areas across the United States, the greater Grand Rapids area has relatively affordable home pricing. Combine those comparatively low prices with increasing demand for property, and you have a recipe for both profit and fraud.
Unfortunately, the potentially lucrative real estate market can lend itself to people making poor decisions in the hope of making money or out of a sense of desperation in the process of hunting for a home.
Lying on mortgage documents is a form of potentially criminal fraud
Banks have gone to great lengths to improve the process by which they vet borrowers following the 2008 financial collapse. Long gone are the days of no job, no income or assets (NINJA) loans. The stricter requirements and more intense enforcement make it difficult for the average worker to qualify for a mortgage and become a homeowner. Even all-cash transactions are more closely watched these days.
Some people may choose to lie on their mortgage applications as a means of securing financing. While most people who would engage in this practice intend to pay back the bank on the property, other people engage in more unscrupulous behaviors. They may place a second mortgage on the property, strip its fixtures and valuable materials, or otherwise defraud the bank of the value the home represents at the time of sale.
Individuals who get caught lying about assets or employment on mortgage applications could face criminal charges related to fraud.
Asking an appraiser to increase the value is another form of fraud
In a competitive real estate market, buyers may have to offer higher amounts of money than is reasonable for a property based on current market prices. With competition for each property on the market, bidding wars have become common in Grand Rapids. Many properties sell in under 24 hours these days.
Potential buyers who offer too much can find themselves in a difficult situation. The bank will send out an appraiser to make sure that the value of the home justifies the amount they lend. You may think there is no harm in offering something to the appraiser if they inflate the price of the home to match what you offered. However, artificial inflation of appraisal value is another form of mortgage fraud that can have serious consequences.
It is difficult to navigate home ownership at any time. When the markets are hot and financial markets are stable, it is even more complicated. Take great care to ensure that you do not accidentally violate the law in your eagerness to become a homeowner.