Appraisal practices have taken center stage lately with the roll out of the new Home Valuation Code of Conduct (HVCC) by the GSEs. And now, the National Association of Home Builders (NAHB) has raised its own concerns over valuations of foreclosures, REOs, and short sales.
NAHB says federal regulators need to write new guidelines for appraising distressed properties. The association claims that appraisers are using foreclosed and distressed sales as comparables with appraisals on newly constructed homes without adequately reflecting the differences in property conditions, driving down new home values.
So it only makes sense that an appraiser should be required to consider the overall condition of a property and the specific factors related to a foreclosure or distressed property sale when selecting and adjusting the value of comparables.”
NAHB points out that appraisers are often only required to conduct exterior inspections of properties that are being used as comparables because they are unable to enter these homes and examine their interiors. Too often, the association says, properties that have been subject to foreclosure or distressed sales have issues related to deferred maintenance or internal damage that an external inspection simply cannot reveal.
The new system sucks and will only hurt recovery. Why would an investor buy and REO to re-sell, it they can’t get it to be fairly appraised ?
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