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Home appraisal fraud is costing you money

This week, Jon in Florida is steamed at the high price of real estate, and he wants to know: Where do they come up with these prices? Esther in Nevada is looking for her husband's long-lost pension. And Susan in Michigan is trying to figure out how much student debt is too much.

I'd like to know who decided that real estate should cost so much. In central Florida, a two-bedroom, one-bath home of 900 square feet sold six years ago for about $56,000 (and sometimes much less). Today, that same house carries a market price of $159,000! Who decided that that same little house was worth $100,000 more today than it was six years ago?
— Jon H.,  Deland, Fla.

In most cases, your neighbors decided.

As long as there are buyers out there willing to pay the asking price, that’s what the market will bear. And there’s no reason to expect sellers to settle for less than the full price they can get for their home.

The asking price for a home is usually based on recent comparable sales. So if one seller gets $160,000 for a 900-square-foot home, once that price is officially recorded, that becomes a “comparable” listing that other sellers rely on. Anyone else with a similar home on the market will expect to get a similar price.

There were several forces at work in the now-defunct housing boom that may have artificially inflated prices in some areas. First, rising prices drew some buyers into the market who had no intention of living in the house they purchased. The hope was that by renting out the property — or just letting it sit empty — they could make a quick buck in a year or two by "flipping" the property. These “investors” represented a huge new source of demand for the existing pool of housing, driving up prices.

There’s also some evidence that in some neighborhoods, buyers may have artificially inflated prices. In some cases, this was to borrow more than the house was really worth and “cash out” the difference.

In other cases, builders of developments who were reluctant to cut the sales price of a new home threw in other incentives — a car in the driveway, a trip to Hawaii — to keep the listed  price from falling. If you’ve got a development full of unsold houses, all it takes is a price cut on one of them to lower the price on every other comparable house.

We’ve heard from real estate appraisers who were asked by mortgage brokers and lenders to appraise a house for an inflated price — before they even took a look at the property. This is illegal: An appraiser is bound by law to provide an estimate of a home’s value based on an inspection — not a number pulled out of thin air.

Last month, Ohio Attorney General Marc Dann sued 10 companies for appraisal fraud. In some cases, Dann got his hands on copies of faxed “order forms” used by lenders and brokers to ask appraisers for a specific price for a given property.

Since reports of widespread mortgage fraud have surfaced, lenders have cracked down on the worst abuses. In some areas, prices are coming down. But the inflated prices that are still on the books may be artificially propping up prices in some areas.

And don’t forget those artificially inflated prices are also used by local tax assessors to decide how much your house is worth. So appraisal fraud may be costing you — even if you haven’t bought or sold a house in years.

If a person renounced their American citizenship and moved out of the country can they ever reclaim any of the money they might have paid into the Social Security fund?
— Matthew, Greensboro, N.C.

No, nor should they.

Social Security is a huge insurance policy. If you insure a car for 10 years, and then sell it without having an accident, you don’t get to ask for your premiums back.

(You may still be eligible for benefits when you retire - even if you're no longer a citizen. But you can't get a lump-sum repayment of your contributions.)

My husband worked for Newberry's Store in Oakland for about 15 years. He is supposed to have a pension through McCrory's. The store has long since been sold. How can I find out who bought the pension funds?
— Esther E., North Las Vegas, Nev.

At this late date, it’s hard to know whether you have any claim. Given the length of time your husband worked for the company, if you think the amounts involved are worth it, you may want to get a lawyer to look this over and see if you have a claim that can be pursued.

We got as far as this SEC filling, which refers to a settlement with the U.S. Labor Department over an annuity that McCrory bought when it filed for bankruptcy and terminated its workers' pension plan in 1992. Apparently, the company responsible for the annuity, Executive Life, itself ran into financial problems and was taken over by another company. At that point, the trail gets cold.

If you want to go the next step, you might want to give the federal Pension Benefit Guaranty Corp. a call and ask to speak with one of their reps. The PBGC is the government agency that is supposed to back failed pension plans. The fact that the company settled with the Labor Department means this may still be on their radar.

You can probably get further with the PBGC as the beneficiary that we can as a third party. For privacy reasons, they probably won’t want to discuss this with anyone other than a beneficiary or their legal representative.

How much total student loan debt is an acceptable or reasonable amount to carry in pursuit of a B.A.? This is loan money on top of the maximum amount for a Stafford loan.
— Susan D., Sturgis, Mich.

The average amount borrowed by undergraduates in 2003–04 was $5,800, according to the latest figures available from the U.S. Department of Education.  

That’s a little more than a third of the average tuition, fees and room and board for a four-year college.

There’s really no rule of thumb on how much borrowing is “reasonable.” A lot depends, for example, on what field you expect to end up in and how well-paid you expect to be when you’re done. A recent graduate with an engineering degree will probably expect to make more than a theater arts major — at least initially. There are also big differences in the cost of living from one part of the country to another: If you settle in a high-cost area, it’s going to take you a lot longer to pay off the debt.

But it doesn’t hurt to sit down and work out an imaginary budget. Picture yourself holding that a brand new degree: figure out how much you’ll need for rent, food, clothing, etc. and then add an amount for student loans. As for your income, you can research how much recent grads in specific fields are making when they get out of school. (Try

It’s all guesswork and this point. But putting it down on paper will give you some idea where you’re headed and give you some goals to reach for along the way.