Appraisals function as a major fraud reducer, especially for internal fraud.
Appraisers will fudge $100k on the value of a $1m house because that's their opinion as an appraiser. They won't fudge $1m on the exact same house (2x value).
That serves as a kind of cap on funny business to some extent. 10% of the value isn't going to make that much difference on the ability to pay for most borrowers so an excess $100k in the valuation doesn't really matter anyway. As long as appraisals don't get too out of line they serve their purpose.
Appraisers will fudge $100k on the value of a $1m house because that's their opinion as an appraiser. They won't fudge $1m on the exact same house (2x value).
That serves as a kind of cap on funny business to some extent. 10% of the value isn't going to make that much difference on the ability to pay for most borrowers so an excess $100k in the valuation doesn't really matter anyway. As long as appraisals don't get too out of line they serve their purpose.