26th February 2013

National Association of Home Builders recommends reforms of residential appraisal system

posted in Appraiser News |

National Association of Home Builders recommends reforms of residential appraisal system

Serious problems in the residential appraisal process must be addressed in order to restore confidence in the residential real estate market and to establish a foundation for sustainable growth of the U.S. economy, according to a new white paper from the National Association of Home Builders (NAHB).

Appraisals are regulated by the states, so standards and requirements vary greatly, resulting in a system that is inconsistent, confusing and does not serve consumers well. The white paper, “Comprehensive Blueprint for Residential Appraisal Reform,” addresses these perceived problems.

It is the work of an Appraisal Working Group formed by NAHB last year to develop recommendations for comprehensive residential appraisal reform. The group consists of homebuilders and representatives from the financial and appraisal sectors. The Appraisal Working Group sought input from representatives of all stakeholders in the residential appraisal process, and the white paper offers specific recommendations for changes to all aspects of the appraisal system.

“Even as the residential construction industry shows signs of recovery, housing activity is thwarted by an appraisal system that remains dysfunctional and is a major impediment to a stable housing finance framework,” said Rick Judson, NAHB chairman and a homebuilder from Charlotte, N.C. “Until we see meaningful appraisal reform, the U.S. housing finance system will be operating under unprecedented uncertainty.”

Judson praised the efforts of Appraisal Working Group co-chairs Barry Rutenberg, NAHB’s immediate past chairman, and Joe Robson, who served as NAHB chairman in 2009, for their leadership.

The Appraisal Working Group addressed the need for reform in four broad areas:

• Regulatory framework and oversight
• Data and technology
• Professional standards
• Practice, process and procedures

“The states are responsible for oversight of appraisal practices, but many states do not provide the funding necessary to perform this function adequately,” Rutenberg said. “A modest investment in appraiser licensing and certification would go a long way toward improving the appraisal system.”

In its white paper, the Appraisal Working Group states that the regulatory framework for real estate valuation needs to foster more effective oversight of standards, guidance and enforcement.

The goal is to better integrate and streamline the jumble of existing requirements set forth by various entities to ensure that residential appraisals occur in a coordinated and effective manner and are subject to uniform and consistent standards. A more unified and functional system is required to:

• Establish ethics and uniform standards
• Promulgate best practices
• Monitor the activities of state appraisal boards
• Establish licensing and certification standards
• Set minimum education requirements
• Support independent education and training programs
• Create policies to ensure appraiser independence
• Enforce and oversee authority for anyone who engages an appraiser
• Establish a standards body responsible for setting data and technology standards

“We believe the white paper has many good ideas that stakeholders can agree on, and we are hopeful that policy makers will move forward soon on many of these proposals,” Robson said. “We look forward to working with our many partners to achieve meaningful reforms.”

The white paper can be found online at www.nahb.org/appraisalwhitepaper

Source: http://www.valuationreview.com/VR/ArticlesVR/Report-recommends-reforms-of-residential-appraisal-57315.aspx

There are currently 3 responses to “National Association of Home Builders recommends reforms of residential appraisal system”

Why not let us know what you think by adding your own comment! Your opinion is as valid as anyone elses, so come on... let us know what you think.

  1. 1 /*On March 5th, 2013*/, Bryan Richards said:

    If you want to see change, then the lender’s need to allow pre sold or private sales as comps and not just MLS sales. It is not appraisal reform, it is what the banks allow us to report.

    Numerous builders are not getting accurate values because a lot of their sales are presold’s or are private builds with upgrades. If these were allowed on the MLS or we were allowed to use these in our reports then the builders would have more accurate appraisal reports when converting to perm financing. It starts with the banks and their lending requirements/practices.

  2. 2 /*On March 5th, 2013*/, lithia said:

    This would be valid if the home builders were not more interested in selling than protecting the parties involved in the transaction. No additional appraisal over sight or reforms are warranted or needed. So far each change that has been made over the past few years has done nothing but allow low fee, less experienced appraisers to work for less than min wage after expenses for AMC’s. The experienced appraisers are retiring or stepping out of lender work as quickly as they can as this whole segment of the business has become extremely unbalanced. Remove the un-bias appraiser’s analysis of the micro and macro market and they can run rampant over consumers.

    This is akin to letting the wolf watch the hen house. Let us keep pushing appraisers further out of the lending process by making it so cost ineffective to do lender work (new home purchases) that AVM can then be utilized and use all the higher end sales and leave buyers in situations similar to buying a new car without doing your research; Upside Down. But then again lenders can start to sell gap insurance on homes for additional fees.

    Builders don’t always disclose all incentives, then list new construction properties higher and higher to force the market up (part of the bubble problem) now they don’t want the un-bias appraisers to actually look at the actual market or consider the data which would clearly show in some cases that the new construction prices are unwarranted. Let us keep an appraiser from reviewing the 1 yr old construction sales that are now foreclosures or short sales sometime 100k less in the same neighborhood and competitive.

    Doctors, Lawyers, Dentist, General Contractors, Electricians, Plumbers, Banks, Mortgage/Lending officers,Inspectors, Realtors, Brokers, Tax Assessors, Code Enforcement,etc. are not required to be re-certified or relicensed every 5 yrs. They obtain their license, training, attend continuing ed and keep it unless they have been negligent and had their license pulled by their respective boards. No appraiser will stand for a 5 yr re-certification as we already complete as much if not more CE than General Contractors (builders).

  3. 3 /*On March 5th, 2013*/, Ed Schaar said:

    The real problem are Appraisal Management Co’s. taking a big bite out the customary appraisal Fees.
    As John Arbucle once said, you get what you pay for!. It is a bitter sweet relationship, since there would be none or very little work outside of them since all Loan work etc. must go through them. I work off the Fee’s. paid. If lower than usual, then the quality is generally less than average. Back in the good old day when appraisal fees were $350.00 and above, I would take the time to do it well and/or meet deadlines. Eliminate this middle man/HMO I consider them and the work will improve. I am a AG appraiser in which is the highest Ca. level.

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