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Home Builders White Paper: Appraisers are Idiots
As you are likely aware, the National Association of Home Builders (NAHB) published a whitepaper on housing finance system reform in February of this year. It is 18-pages long, so you can read and digest it in about an hour. All appraisers need to read it. This is simply because the NAHB has a lot more clout in Washington, D.C. than does any single appraisal organization. Therefore, Washington will listen to NAHB before it listens to us. NAHB is biased when it comes to anything that will prevent it from building and selling homes. Frankly, this is how it should be. NAHB has the responsibility to advocate in its own best interests. And so do appraisers. We appraisers also have the right to expose NAHB’s lapses (or absence) of logic. For an example of this lapse or absence of logic, from the whitepaper’s language it is clear NAHB thinks real estate appraisers are an impediment to the mortgage loan process. The whitepaper, under the sub-heading of “NAHB recommends reforming the appraisal system,” proclaims which profession, all by itself, caused the last housing bust:

“Many housing industry participants believe the current appraisal system is fundamentally flawed. This view has garnered increased support as the ongoing turmoil affecting the housing and credit markets has brought greater focus to the importance of fair and accurate appraisals. In response to criticism that lax appraisals contributed to the crisis in the financial industry, there has been an industry-wide effort to reform the appraisal system. The effort has resulted in lenders, secondary market participants, and banking regulators all implementing new, more restrictive appraisal policies which have become a major impediment to the housing market recovery. On top of this, an extreme downward bias has been imbedded in the home valuation process. Rather than apply more restrictive appraisal policies, the industry should explore ways to improve the quality of appraisals– particularly as they are applied to distressed markets. Home builders are concerned with appraisals that solely use comparable sales to determine value rather than also considering the cost or income approaches. In particular, it is important to consider giving greater weight in distressed markets to alternative means of valuation, such as the cost-based approach. Using comparable sales to determine an appraised value in distressed markets too often is leading to homes failing to appraise at the sales price or even construction cost.”

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