By Kevin Chiu
Appraisers are taking heat for home sales not improving in many areas of the U.S. as new uniform guidelines for appraisals go into effect. The new federally mandated requirements ushered in through Dodd-Frank financial reform went into effect Thursday.
Dodd-Frank reform in relationship to appraisals is intended to require lenders to be accountable for the costs it charges mortgage borrowers during the loan application process, and modernize real estate appraisal regulations by enforcing actions against appraisers who do not abide by the new regulations.
Low appraised home values are the most commonly contested part of real estate transactions as appraisers use nearby comparable properties to weigh on for the heaviest part of their appraisals. The record volume of foreclosures and bank assisted short sales has made it tough on appraisers to come up with enough good comparable properties in many cases.
Slow home sales in most regions of the country haven’t made it easy on appraisers to come up with anything but low values compared to years ago as real estate experts look for others to blame for epidemic mortgage fraud, Wall Street manipulation in the financial markets and loose lending practices that triggered the real estate bubble.
Pending home sales of existing homes declined in July 1.3% across the U.S. , according to the National Association of Realtors. “The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” said NAR chief economist Lawrence Yun. “Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”
Government sponsored enterprises, Freddie Mac and Fannie Mae required the new appraisal standards, mandating additional information for appraisers. Global DMS says that appraisers who are not ready for the deadline can obtain software updates from the firm’s website and other appraisal vendors.
Declining home values in most markets over the majority of the year have also made it tough on appraisers to come up with higher prices to meet the values that homes and other properties are often in contract for in the slower marketplace.