Builders, Realtors' Associations Call For Appraisal Reform

Both the National Association of Home Builders and the National Association of Realtors have called for changes in the way the appraisal industry valuates homes for sale, claiming that the current appraisal system is flawed and further damaging the nation’s battered housing market.

Using foreclosed and distressed sales as comparables with appraisals on single-family homes without adequately reflecting the differences in the condition of the respective properties is needlessly driving down home values, NAHB stated June 22 in a release calling for new guidelines for appraising distressed properties.

Two days later, the Realtors’ Association released a report that existing home prices declined 17 percent in May compared with a year earlier, stating that flawed appraisals are derailing real estate sales and depressing values across the country. Click here to read the Bloomberg News story: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aWyCYkxx5W1w

A “low appraisal” is defined as a valuation that comes in for less than the price a prospective buyer has agreed to pay for a property, and for which the property owner has agreed to sell it. The result: “thousands of delayed or canceled transactions,” said Lawrence Yun, the Realtors’ group chief economist.

“Any home buyer can recognize the difference between a well-kept home and a distressed property that is damaged or not properly maintained. So it only makes sense that an appraiser should be required to consider the overall condition of a property and the specific factors related to a foreclosure or distressed property sale when selecting and adjusting the value of comparables,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.

NAHB called for “proper regulatory guidelines for those who use distressed or foreclosed properties as comparables when determining home values.” Click here to read the full NAHB release: http://www.nahb.org/news_details.aspx?sectionID=0&newsID=9369