Appraisal Institute President Richard L. Borges II, MAI, SRA, addressed the National Association of Home Builders Mortgage Roundtable in Washington, D.C., March 12 where he suggested three steps that home builders could take to assist with the valuation process.
1. Provide all information requested by the appraiser — specifically HUD-1 statements and fully-executed documentation of the actual plans and specifications for new home sales. These are critical to analyzing the transactions for unreported sales concessions and possible inflated prices for upgrades.
2. Post new home sales in the multiple listing service and in any other database that’s frequently used by appraisers.
3. Adopt the updated Residential Green and Energy Efficient Addendum issued by the Appraisal Institute, and provide the document to lenders, real estate agents and appraisers. The Addendum can be used with common appraisal report forms and can help appraisers analyze green and energy-efficient features.
The NAHB recently has been critical of the valuation process, and the organization’s Appraisal Working Group released a white paper Feb. 20 calling the current appraisal system “impaired.” As a result, Borges participated in a discussion of ways in which the appraisal regulatory structure could be improved, areas where the organizations agreed and areas that warranted further discussion.
Specifically, Borges noted that stakeholder input is important to government and secondary market guidelines relating to appraisals. He also expressed concern about attempts to “rig” the valuation process by prohibiting (by legislative edict) the use of distressed sales as comparables, which was proposed Feb. 25 by the Bipartisan Policy Center Housing Commission in recommendations to Congress. A similar proposal also is pending in the Nevada legislature.
Borges concluded the AI presentation by offering to work with federal and state government agencies and real estate and mortgage stakeholder organizations on improvements to risk assessment involving collateral valuation as part of the residential mortgage finance system in the U.S.