That is very interesting.  I trust Alan Greenspan, and I sure hope he is right.  The CNBC special included a brief interview with an appraiser from New York who said that he estimated that 75% of all appraisals are inflated.

I know of one such property locally that was appraised for $120,000 and mortgaged for 100% of the value.  The owner died and the widow could not make the payments.  After the foreclosure the bank bought the property back at sheriff's sale and they put it on the market with a local real estate agent.  The property sold on the open market for $55,000.  I have known the neighbor to the property for many years, and I think the property might have been worth $60,000 - $70,000.  It is right next to an industrial building, very dirty and noisy. 

It will be interesting to see how many of these situations arise when rates climb higher and foreclosures pick up.  I think a lot of banks will be surprised to find out the true value of the properties they have taken as collateral. 

It only takes a few rotten appraisers to get the ball rolling.  Once they over-appraise a few properties and they get used by honest appraisers as comps, the entire market soon becomes inflated.

Good discussion.  Thanks for you input.

Best,
Robert A. Franco
SOURCE OF TITLE