In a white paper officially released Feb. 20, the National Association of Home Builders called the current appraisal system “impaired.” While noting it does not agree with all of NAHB’s recommendations, the Appraisal Institute said it welcomes the opportunity to work with home builders and others interested in reform.
The report cited what it considered to be inconsistent and conflicting standards and guidance, poor oversight, a shortage of experienced and qualified appraisers and the lack of a standardized data system. The Appraisal Institute pointed out that many of NAHB’s proposed reforms already exist and simply need to be enforced, and that it is the residential mortgage finance system that needs to be reformed.
The report is the product of the NAHB’s Appraisal Working Group, which was formed in 2012 to develop recommendations for comprehensive appraisal reform. The group consists of home builders, financial representatives and valuation professionals, including AI President Richard L. Borges II, MAI, SRA.
“An obvious and important way to address many of the problems cited in NAHB’s report is to ensure the hiring of highly qualified and competent appraisers,” Borges said. “Also, appraisers need to be allowed to follow best practices.”
He added: “Real reform must be driven primarily by those who don’t have a financial stake in an appraisal’s outcome.”
In its report, titled “A Comprehensive Blueprint for Appraisal Reform,” the NAHB said it wanted to see the valuation profession make several changes that could help the real estate market “establish a foundation for sustainable growth of the U.S. economy.”
Among the group’s recommendations:
• Reaffirm and streamline key appraisal principles contained in the Uniform Standards of Professional Appraisal Practice.
• Establish uniform credentialing standards that are specific to each area of appraisal practice and create clear education and career paths for appraisers.
• Establish a single, consistent set of rules and guidelines for appraisals.
• Consider all three valuation approaches — cost, income and sales comparison — in estimating values, and report a range rather than a single point of value.
• Set standards and processes to ensure the engagement of the best appraiser for the assignment.
• Establish workable procedures for expedited appeals of inaccurate or faulty appraisals.
“We look forward to working with home builders and anyone else interested in real reform that benefits everyone involved in a real estate transaction,” Borges said.
Read the NAHB’s white paper.