4 Ways to Fix Appraisals

by Peter Thomas Ricci


Earlier this year, the National Association of Home Builders (NAHB) released an extensive white paper that analyzed every aspect of the home appraisal process. Concluding with recommendations for reform, the NAHB described the current appraisal system as a “dysfunctional” system, and that by reforming the system, one would  “restore confidence in the residential real estate market and establish a foundation of sustainable growth of the U.S. economy.”

The NAHB organized its recommendations around four main areas:

1. Regulatory Overhaul – First, the NAHB wrote that appraisal regulation, a labyrinthine system that involves numerous state and federal agencies, not to mention overlapping education requirements, is a “jumble of existing entities,” and that not only should regulations be streamlined, but made more transparent as well.

2. Data Shake Up – As our cover story mentions, no single registry exists for the nation’s real estate assets, and the NAHB recommended creating a “Terra.gov” registry that would be accessible online to stakeholders. Also, the NAHB recommended the creation of a valuation repository, a public/private exchange for transactions and a standards body for establishing guidelines on technology use.

3. Be a Professional – Appraisers currently adhere to the compliance guides set forth by the Uniform Standards of Professional Appraisal Practice, or USPAP; however, USPAP has changed every two years since 2006, which has confused appraisers as to what the compliance guides actually stipulate. So, the NAHB recommends not only a streamlining and clarifying of USPAP guidelines, but also a stronger initiative towards certification, which would involve colleges offering appraiser certification programs and individual certificates for each area of appraisal practice, a la new construction.

4. Standard Operating Procedure – Finally, because appraisers primarily use form reports from Fannie Mae and Freddie Mac to valuate properties, the NAHB wrote that the appraiser’s role in home valuation is more akin to “form fillers” than anything else; thus, the association recommended appraisals factor in cost and income in valuations, not merely comparisons, and operate under a single set of rules that utilize large data sets in determining a home’s value.

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  • Steve Kahane says:

    Wow! This was clearly not written by an appraiser or anyone with any knowledge about appraisals. The labyrinth of regulations governing appraisers has very little to do with valuation. The intersection of state and federal regualtions generally applies to licensing and disciplinary actions, not valuation.

    For many of the same reasons that agents are still required to aid in the listing and sale of homes, appraisers are required for valuation. Residential real estate is not a commodity. Each property is unique. Becuase the surroundings, designs, quality and condition of each home vary, there will always have to be a real set of eyes to assess the impact of these factors on value.

    USPAP does not change every two years and the periodic changes that do occur seldom impact valuation methodology. Most changes involve record keeping, discosure or other non-value related issues. Appraisers are required to take a USPAP class every 2 years as part of our continuing education requirements in order to maintain a license.

    As with any profession, (real estate sale included) real estate appraisal has its share of good and bad practitioners. There are some appraisers who ‘form fill’ in an attempt to maximize their bottom line. However, this has nothing to do with the standardized for reports. Valuation methodology remains the same regardless of the report type or method. Whether the report is a 100 page narritive or a 5 minute oral the valuation is the same. The appraiser IS ALWAYS required to determine which approaches to value (sales comparison, income and cost) are necessary to produce a credible result. This too is standad appraisal practice and does not vary based on the type of report.

    If you would like some real tips about fixing an appraisals, I would recommend asking an appraiser.

  • Tom McWhorter says:

    I am a Realtor who has jus recently had two incorrect appraisals. One they used 3 two story homes to appraise a one story house. Two of the the 2 stories had all the bedrooms upstairs. The homes with all of the bedrooms up sell for less because they are less desiable. The second appriasal involved a 2 story home built in 2007 with a lot of enegy features granite countertops and wood floors. I found homes without the enrgy features or other upgrades just mentioned ,built in 1999 that sold for $74.47 a foot.. The appraisal came in at $65 a foot. Only been selling for 23 years. Could someone answer these bizzare questions?

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