Appraisals: Take a Problem-Solving Approach

Appraisal experts weigh in on the new way of doing business, one year after the creation of the Home Valuation Code of Conduct.

June 1, 2010

The NATIONAL ASSOCIATION OF REALTORS®’ Pending Home Sales Index showed a 5.3 percent increase in March. It’s what you’d expect for the spring market, especially with buyers cashing in on the federal home buyer tax credit. But it’ll be worth watching what percentage of those sales close.

Early last year we reported on a widening gap between pending and existing-home sales, the result of buyers getting cold feet or not being able to get financing. And although pending and existing-home sales are tracking more closely today, I continue to hear about good deals gone bad.

With the lending industry in such a state of flux, you just can’t count on a motivated seller and a qualified buyer adding up to a closed sale.

I recently talked about this topic with some appraisal experts during a REALTOR® Magazine webinar to mark the one-year anniversary of the Home Valuation Code of Conduct—the rules implemented to ensure appraiser independence. Almost from the effective date of the rules in May 2009, horror stories began surfacing about long delays and shockingly low appraisals.

Certainly, we’ve moved beyond that difficult time, but we’re still adjusting to a new way of doing business. The webinar panelists offered advice to avoid appraisal problems:

  • Help appraisers do a good job. The HVCC doesn’t prohibit contact between appraisers and real estate practitioners. Be at your listing when the appraiser inspects it, and make sure he or she does a thorough job. Also, include useful information in the MLS so that appraisers have all the data they need to find comps.
  • Know the difference between a low appraisal and a bad appraisal. Sometimes, like it or not, a low appraisal is justified. But one that doesn’t use the best comps to determine value isn’t.
  • Take legitimate concerns to the lender. Appraisal management companies typically have a review process for appealing an appraisal. But don’t hesitate to go to a lender if you see a pattern of bad appraisals or excessive delays.

There are myriad ways deals can go south today—and the impact of this on REALTORS®’ bottom line is evident: a 25 percent drop in median income since 2006 (see page 8).

But don’t let the challenging times stop you from setting high goals. As one of our "30 Under 30" honorees this month told us: "If anything, this market has made me a better agent."

That sounds like an attitude that gets sales closed.

Learn More

Play back the free webinar, "HVCC: One Year Later."

Stacey Moncrieff

Stacey is executive editor of publications for the National Association of REALTORS® and editor in chief of REALTOR® Magazine.