Hotel woker Danny Ruiz was living wtih his wife and four children in a cramped New York apartment when he saw a television ad promising the family a way out. "Why rent when you can own your won home?" Pennsylvania builder Gene Percudani asked. The company even offered to pay his rent for a year, while he saved for a down payment. So the Ruiz family fled the city for the Pocono Mountains, whee they bought a three bedroom Cape Cod home for $171,000. However, when they tried to refinance less than two years later, the home was valued at just $125,000. "I just about flipped," said Mr. Ruiz. Later Mrs. Ruiz remarked about her husband, "He went nuts." Percudani, a 51-year-old native of Queens, New York, built a thriving homebuilding business in this market, running folksy television ads offering New Yorkers new homes in Pennsylvania.If they joined Percudani's program, called "Why Rent," homeowners would find financing throuh another of his companies, Chapel Creek Mortgage, which brokered loans from J.P. Morgan Chase and the company's Chase Manhattan Mortgage unit. For years, the "Why Rent" program appealed to workers with modest salaries, such as Eberht Rios, a trucj driver for UPS. Rios bought a home in the Poconos for $140,000.This year, when he tried to fefinance he was told the home was valued at only $100,000. One local appraiser, Dominick Stranieri, signed off on most of the "Why Rent" deas that state officials now say were overpriced, including the Rios and Ruiz homes. Percudani's firm picked Stranieri as his appraiser because of his quick work and low fee of $250, instead of the typical $300 to $400. In exchange for a steady stream of work, Mr. Stranieri accepted without question valuations from Percudani's company. Other common methods of creating revenues include investors and others buying distressed properties and then, using inflated appraisals, selling them for a big profit. In order to secure the efforts of a "dirty appraiser," those involved with the fraud would pay up tp $1,500 under the table on top of the appraiser's standard fee of $400. Another unique twist to the plot is that few of the people involved in making mortgage loans have a longterm interest in them. Traditionally, bankers made loans directly and held them, giving the lenders a strong incentive to find fair appraisals to protect their interest. Today, however, many appraisers are picked by independent mortgage brokers, who are paid per transaction and have little stake in the long-term interest in their lons, becasue they sell them off to investors. Appraisers increasingy fear that if they don't go along with higher valuations sought by brokers, their business will dry up. Do you thinka county appraiser would do a lot beter than a private practioner? Joel Marcus, a New York-based attorny recently had his property valued at $2.2 million by a county appraiser, up from $2 million the previous year, which meane a $7,200 jump in hs property tax bill. Based on recent home sales in his neighborhood, Marcus beleives his property is valued at between $1.7 and $1.8 million. Based on this information, Marcus has appealed his appraisal. Although a good appraisal requires doing hours of legwork, visiting a property to check its condition, and coming up with at least three comparable sales, Percudani says he isn't surprised that later appraisals, or even different appraisals made at the same time, could result in different values. "Appraisals are opinions," he says. "Value, like beauty, is in the eye of the beholder." Stranieri and Percudano deny any wrongdoing and say they operated independently and that any home that declined in value did so because of a weak economy. "It's like buying a stock," Percudani says in an interview. "The value goes up. The value goes down."

How is an opportunity created to commit appraisal fraud? Does the appraiser act alone, or is collusion routinely involved?