Appraisers: ‘Don’t shoot the messenger’ on valuations

The Government Accountability Office (GAO) earlier this month reported that the Appraisal Subcommittee, which oversees the appraiser regulatory programs established by the states, needs to improve its monitoring procedures.

“These findings underscore the need to establish an effective oversight system to ensure that appraisals accurately reflect true market values and don’t harm aspiring home buyers or builders,” said Bob Nielsen, chairman of the national Association of Home Builders.

Meanwhile, “don’t shoot the messenger” is the message the Appraisal Institute has for those in the real estate industry. Appraisers have been taking heat the last few months over low home values, with critics arguing that values aren’t matching a home listing or contract’s price and valuations are unfairly weighing distressed properties into the equation.

“Appraisers don’t set the real estate market; they reflect what’s happening in the market,” said Sara W. Stephens, the Appraisal Institute’s president. “Obviously, the market is depressed – home prices have fallen far below the values of a few years ago. Many homes simply aren’t worth what their owners think they are.”

Appraisers say their main goal is to protect lenders against entering into a risky mortgage, not justifying the sales price for a buyer or seller.
Buyers and sellers “shouldn’t assume an appraisal is somehow ‘wrong’ if it doesn’t match the listing or contract price,” Stephens said. “There’s no reason to assume the contract price is the ‘correct’ price simply because it’s higher than the appraisal.”

A recent NAHB survey shows that one out three builders have lost signed sales contracts because of flawed appraisals and a fall survey conducted by the National Association of Realtors shows that 18 percent of Realtors reported a recent contract cancellation or delay as a result of a low appraisal.