We are first-time developers and face default on a new buildout on 20unit luxury townhomes because the current appraisal is 330k/unit (which is our build/land cost). The units need to appraise for 400k to establish enough equity for the construction loan to be refied into a permanent loan.

I would like to sell off 5 units at $400k by assisting the buyer with $50k ($70k if nobody's interested) in order to establish appraisal value for the remaining 15 units, to get a loan for the remaining units. Buyer of these inflated value townhomes would put down 70K (20%) & we contribute 50K free money. This isn't a completely artificial inflation as we are writing a check w/ hard cash for the amount which we wish to inflate.

From the lendor's risk perspective, even if the house were to liquidate at the low-ball appraised value of 330k, there exists a 36% cash equity in the home (120k down for 330k liq. value) - the lendor has a huge cushion to avoid loss in foreclosure.

Everyone's covered, nobody's hurt. Its scheming, but for the good of all, if I'm right. Its ethical if no one suffers, yes?

Yes, prop taxes will be higher (1k more per year), but the buyer has huge equity and a near-guarantee of high resale value due to both the 5 units, and the other 15 units we will refinance to keep for ourselves.