With sales and construction showing signs of growth, home appraisals have now emerged as a major component to a successful reboot for the housing market.
“It’s hard to talk about any recovery of the housing market and home prices until the appraisal issue is squared away, and that is a broad issue,” said Guy Cecala, publisher of Inside Mortgage Finance.
According to recent housing data from the National Association of Realtors (NAR), contract failures were reported by 16 percent of NAR members. Also, 9 percent of members reported delayed contacts because of low appraisals, and another 13 percent said that their contracts were renegotiated to lower prices because appraisals were below the initially agreed price.
Chicago Agent has reported on appraisals before, noting both the complexity of the process and also the recent history of appraisals.
A final factor in appraisals is the changing landscape of certified appraisers. During the housing boom, Realtors were allowed to select appraisers for Fannie Mae or Freddie Mac loans, which comprise 90 percent of the U.S. loan market. With new financial regulations, though, that privilege is no longer available, and third party appraisal management companies have filled in the void.
Agent Genius mentioned the issues of the companies: “The management companies get paid and are offering smaller and smaller commissions to overworked appraisers who ultimately bear the liability of the appraisal in the new ‘sue everyone’ era.”
Clearly, the appraisal process inspires considerable reaction, both good and bad, but one question persists: is there a solution? And can it be the final component to achieving a sustainable housing recovery?