Appraisal Scares on Exiting your Flip Part 2 FRAUD!!

[Martin Sterling]

This is a continuation of the following post. If you haven't read it, here it goes.

https://www.biggerpockets.com/forums/67/topics/456...

So, the terribly low 220k appraisal that the buyer did which should have been at least 230k finally has some answers, or maybe more questions than answers.

So after we got the bad appraisal we contested it. We told them, look the 1st unit has 3 beds 1 bath, not 2 beds. The second unit has 4 beds 2 baths, not 2 beds 1 bath. And the second unit is 1700 sqft, not 1200.

The buyer's attorney sent an email back saying the appraiser will raise the appraisal to 225k and that's it. When we looked at the appraisal, he was still short not counting 1 bed on the 1st unit, a 2nd bed in the second unit, as well as missing 500 sqft. He also put the rents down for $1200 each unit, when they're actually $1500 for the first unit and $1800 for the second unit.

My mentor said this is clear appraisal fraud. The appraiser was trying to get a lower price unlawfully. 

We actually agreed that we would take the 225K offer, but, he needs to accurately depict the property on the appraisal report. The problem it seems is if the appraiser does accurately depict the property, he cannot justify 225k.

My agent says one of the problems is there's not many comps in the area. There are 3/1, 2/1's and 3/1, 3/1, but not any 3/1, 4/2. Even still, the appraisal report should reflect the subject property accurately.

If this is illegal appraisal activity, do I have any meaningful timely recourse? I don't want to spend time and energy getting this appraiser in trouble if it doesn't help my deal. 

Also, who benefits from the appraisal? The FHA buyer's already out of attorney review and getting a seller concession for the down payment. Is the bank putting the appraiser up to this? That's gotta be super illegal.

At this point the attornies are going at it. I just need to close by the 29th.

What do you guys think?