Accurate home appraisals have to be available to home owners for the housing market to improve, the NATIONAL ASSOCIATION OF REALTORS® told a Congressional panel this week.
An accurate appraisal is the foundation for making a mortgage, said Frank Gregoire, immediate past chair of NAR’s Real Property Valuation Committee, in testimony before the House Financial Services Subcommittee on Insurance, Housing and Community Involvement.
A number of issues are impacting the credible valuation of real property, including appraiser competency and local market knowledge, challenges in accurately estimating market value in stabilizing markets, and the lack of oversight and regulation of big companies that manage the appraisal process.
While many appraisal management companies provide legitimate services for legitimate fees, others are causing problems for home owners by:
- Insisting appraisers include specific transactions as comparable sales
- Not giving appraisers enough time to do a thorough job
- Making appraisers accept liability if a loan goes into default and the original appraisal is called into question by the lender
All of this puts pressure on the appraiser, compromises their independence, and negatively impacts the quality of the appraisal report, said Gregoire. The result is that appraisers are leery of doing appraisals that value houses at more than the last comparable sales price. That artificially keeps home prices low.
“The end result is that lenders and consumers are being underserved, and all of this is contributing to the failure to recognize positive movement in prices and values in many markets, creating an additional obstacle to the housing market recovery,” said Gregoire.