In round two of NAHB’s appraisal summit in the National Housing Center in Washington, D.C. on Nov. 3, participants honed in on what can be done to enable builders, lenders, and real estate agents to provide appraisers with information they should know in determining the value of a home.

Following up on the meeting — which assembled leaders from major appraisal, lending and housing agencies and federal housing and banking regulators — NAHB will be moving ahead to clarify how builders and others can communicate with appraisers under the Home Valuation Code of Conduct (HVCC) that went into effect last spring. “At the end of the day, a fair appraisal is what all of us want,” NAHB Chairman Joe Robson told the summit.

The appraisal issue has emerged as one of the top priorities for NAHB leaders as the housing industry struggles to gain momentum and gather sufficient strength to create jobs and support a strong rebound in the nation’s economy. At the center of the problem, some appraisers have been using foreclosure and other distressed sales as comparables for appraisals without making proper value adjustments for differences in the quality and condition of the new homes they are assessing. Properties involved in distressed sales often are in poor condition due to neglect or deliberate damage.

Real estate agents, among others, can serve as excellent sources of information on distressed sales comps, but have been hindered in their communication with appraisers. In the first meeting of the appraisal summit on Sept. 21, participants noted that there have been “unintended consequences” from the HVCC, including a perception that interested parties are not permitted to communicate with the appraiser. Robson said that NAHB was looking for something that its members can used “to dispel some of the myths about who can be involved in the process.”

A good answer to this particular issue, summit participants heard, can be found in sets of Frequently Asked Questions individually issued by Fannie Mae and Freddie Mac to clarify what the code of conduct requires and allows. Both of their FAQs state that interested parties are permitted to communicate with the appraiser to provide information relevant to the appraiser.

The intent of the HVCC is to come to an accurate result, participants were told. As long as the result is not to improperly influence the appraiser, then providing information is appropriate if it helps achieve an accurate valuation.

Another concern for NAHB members, said Sandy Dunn, the association’s immediate past chairman, is appraisers who have been coming from outside the area to appraise properties in local markets they don’t adequately know. The bottom line, she said, is that it “doesn’t matter where they come from if they know the area in which they are working. They need to know the market.”

The concern over out-of-town appraisers is part of a larger concern over ensuring that appraisers are qualified and experienced, a matter of major importance that took up much of the discussion at the summit. Education will become increasingly important to enable appraisers to recognize the value of green products as they become a fixture of the new homes that are being produced, Robson noted.

Dunn also cited concerns over the need for creating a process that would enable builders and others to receive a second appraisal when the initial appraisal is wrong. There is currently no consistent process for appealing or questioning the results of an appraisal.

At their first meeting, summit participants discussed the possibility of following the example of the Veterans Affairs (VA) Loan Guaranty Program, which has established a process that requires an appraiser to contact the lender for additional information if it appears the appraised value of a home will not be sufficient.

Unfortunately, broader application of the VA reconsideration process is limited because of the unique structure of that program and the direct relationship between the VA and the appraisers assigned to handle valuations on VA transactions.

The HVCC does not prohibit lenders from requesting a reconsideration of an appraisal in order to correct errors, such as miscalculated square footage or the wrong number of bedrooms. But “many lenders apparently don’t understand this,” said Dunn. “Lenders frequently won’t take on any additional information, and people around the country feel there is no appeals process.”

For more information, e-mail Bill Renner at NAHB, or call him at 800-368-5242 x8597. [Return to top]