Appraisals

The recent turmoil in the housing and credit markets brought greater focus to the importance of fair and accurate appraisals. In response to criticism that lax appraisals contributed to the financial crisis, tighter appraisal policies have been implemented by lenders, the Federal Housing Administration, Fannie Mae and Freddie Mac.

However, the pendulum has now swung too far and reports of homes failing to appraise at the sale price, or even construction cost, have become prevalent. Inaccurate appraisals remain a major impediment to the housing recovery, and therefore, finding solutions to these problems continues to be a major priority for NAHB.

Policy Statement

NAHB believes that fundamental appraisal system reform is essential to restore confidence in the residential real estate market and to establish a foundation for sustainable economic growth. To address shortfalls in the appraisal process, appraisers must develop realist valuations based on sales that are truly comparable and lenders need to use appraisers who are knowledgeable and experienced in appraising specific property types located in a given market. Regulators, appraisers, lenders and all of the stakeholders in this debate must come together to establish regulatory guidelines for appraisers that acknowledge the reality of today’s marketplace.

Why It Matters

Flawed appraisals are harming new home values and killing sales in many markets because they do not accurately reflect the value of the home. Some appraisers are improperly using distressed properties – many of which have been neglected and are in poor physical condition – as comparables in assessing the value of brand new homes without accounting for major differences in condition and quality.

This is not only unfair and unreasonable, but it hurts home owners and home buyers alike. Many home owners seeking to refinance and take advantage of today’s affordable low interest rates are unable to do so because their house appraisals are coming in too low. A move-up buyer is out of luck if the appraisal on their existing home comes in below what they owe on their current mortgage. Likewise, many prospective home buyers have been left out in the cold because their dream house was appraised below the sales contract price.

Major reforms in appraisal practices and oversight are needed to ensure that appraisals accurately reflect true market values and don’t contribute to price volatility or harm aspiring home owners and move-up buyers.

News

February 19, 2015
Be Proactive for a Green Appraisal
When it comes to getting an accurate appraisal for a high-performance home, it’s easier and more practical to take the right steps up front than to try to get a low appraisal revised after the fact.

February 5, 2015
Solar Does Add to Home Values
Buyers are increasingly willing to pay a premium for homes with solar photovoltaic (PV) energy systems.

December 19, 2014
Green Appraisal Addendum Gets New Boost
The Home Innovation Research Labs has completed an agreement with the Appraisal Institute to license the Residential Green and Energy Efficient Appraisal Addendum.

November 26, 2013
Here’s the Lowdown on Thwarting Low Appraisals
Learn how builders can fight back against low appraisals.

Additional Resources