By Peter Ricci
You gotta hand it to home appraisals – they are persistent buggers. Despite repeated coverage by the press and constant pressure by the National Association of Realtors (NAR), every month, an uncomfortable share of Realtors report either contract failures or problems with their transactions because of low and uninformed appraisals.
But now, with the housing market on the clearest path to recovery since the boom, is the inspiration finally here for real appraisal reform?
Home Appraisal Headaches
The latest survey of the home appraisal market by NAR, which was conducted for contracts in June, July and August, is largely consistent with the narrative we just outlined:
- Sixty-five percent of Realtors reported no contract problems with home appraisals, however, 11 percent reported a contract cancellation because of a low valuation, while 9 percent reported a delayed contract and 15 percent a contract renegotiation for the same reason.
- Realtors are still reporting inappropriate comps, where home appraisals are based on foreclosures, short sales and run-down properties.
- Also, Realtors have experienced problems with inconsistent appraisals, values that do not affect current market conditions, slow turnaround times and out-of-town appraisers with little knowledge of the local market.
Home Appraisal Reform?
Again, these criticisms of the home appraisal process are nothing new, and they always lead to one central question – what can the real estate community do about it? NAR, for its part, has “long advocated” for reforms to the system, including an independent appraisal process (removed from the large companies that often collaborate with lenders) and enhanced education requirements for appraisers; NAR has also suggested limiting the number of comps an appraiser can use, so as to avoid the inclusion of any distressed properties.
But even if agents and their clients are unable to take legislative action, they can take a number of steps to challenge low appraisals on their own properties, a process we just detailed in our latest issue.