Following a Residential Real Estate Appraisal Summit held in Washington, the leadership of the National Association of Home Builders (NAHB), the National Association of Realtors and the Mortgage Bankers Association (MBA) are calling for immediate action to address their appraisal-related concerns, including clarifications with regard to the Home Valuation Code of Conduct (HVCC) and the establishment of best practices for the appraisal process.
At the summit – which was hosted by the NAHB – federal regulator agencies and housing and financial institution stakeholder and appraisal organizations discussed appraisal problems. Among the problems discussed was the use by some appraisers of foreclosed or other distressed properties as comparables without proper adjustments, as well as what the groups call the "unintended consequences" of HVCC's implementation.
The groups are urging federal regulators to adopt and enforce "clear, concise regulatory guidance" on the use of distressed and/or foreclosed properties that will allow appraisers to develop realistic valuations based on sales that are truly comparable.
"Appraisers generally are only required to inspect the exterior of a property that is being used as a comparable, because they are normally unable to enter these homes and examine their interiors," says NAHB Chairman Joe Robson. "But all too often, properties that have been subject to foreclosure or distress sales have issues related to deferred maintenance or internal damage that an external inspection simply cannot detect. You can't compare these properties to new homes that are in market-ready condition."
"Ensuring that appraisals are fair and accurate is the lynchpin of our secured lending system," adds Robert E. Story Jr., incoming chair of the MBA. "As a lender, it is crucial that I can count on the fact that an appraisal is correct and that the appraiser has not been subject to pressure from any interested party to the transaction."