Banks are not going to approve any loan that someone by their income can not service the debt and interest. If a willing buyer and seller agrees to X for the sale of a property, that by definition determines FMV. No one forces a buyer to buy, and banks today are much more scrutinized as to loan qualifying procedures and insuring the quality of their debtors and underlying equity. The real estate bubble and the failure of banks changed how banks do business and at one time afterwards it was really hard to qualify for a home loan, they have lightened up some, but not to the point of Penn Square Bank stupid, far, far, from it. Loan reserve requirements and stress test requirements have increased.
@Marshal Jim Duncan could speak much better than I on all of this.
If a buyer is so phucking stupid to not compare comp values as ANY individual or real estate agent would do, not sure how you fix stupid. Bank would require an appraisal from someone they trusted to properly protect the loan.
IF what you say is true, this would require massive collusion between the appraiser, the bank, and the property owner. Is it worth it for the appraiser? You just admitted no. Bank? Oh hell no. But this then ignores the fact an individual buyer and / or his real estate agent, ignores comp values and the need for their own appraisal.
None of this makes sense, and if it was happening it is not just a Stitt issue but everyone in the transaction with massive collusion and some really STUPID buyers and their agents. Having a hard time seeing any of this aligning. Possible? Sure. Likelihood? So small not even funny. How do so many people miss a property being over valued by almost 100% when it is so easy to discover with public real estate records for comps, especially buy a buyer and bank that has to meet certain loan requirements.