NAHB regroup on the HVCC/Appraisal issue from after a very silly press release a few weeks ago to a more coherent message in the to the current press release [FAULTY APPRAISAL PROCESS HARMING HOUSING AND THE ECONOMY} which has more stats.

>Twenty-six percent of builders are seeing signed sales contracts fall through the cracks because appraisals on their homes are coming in below the contract sales price, according to a nationwide survey conducted by the National Association of Home Builders (NAHB).

>“Home builders are increasingly concerned that inappropriate appraisal practices are needlessly driving down home values. This, in turn, is slowing new home sales, causing more workers to lose their jobs and putting a drag on the economic recovery,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.

Ok, I can relate to this but the 26% figure is much higher than I would have thought, and I see myself as an appraisal pessimist these days. NAHB essentially defines faulty as “killing the deal” which is a very thin standard, but still their argument has merit.

This press release comes on the heels of the NAR press release in the form of research that said that 37% of all realtors have had 1 or more deals blow up because of the appraiser.

>Lost sales were reported by 37 percent of Realtors® attempting to complete home sales, with 17 percent reporting one lost sale and 20 percent reporting more than one lost sale.

>Approximately 85 percent of NAR Appraiser members reported a perceived reduction in appraisal quality.

Although these are trade groups and are known for spinning on behalf of their members, in this case, I do believe they are right. Appraisal quality has fallen sharply and the fact that Appraisal Management Companies (AMC) being enabled by HVCC has a lot to do with that.

Here’s how the AMC trade group responds to appraisal criticism from real estate agent and mortgage broker trade groups.

>Realtors and mortgage brokers say the new procedures tend to produce below-market valuations that can delay or kill pending deals. Consumers are paying for the changes in higher fees and subsequent appraisals when the property doesn’t price right initially, they claim.

>Such complaints are a “gross mischaracterization” that merely parrot talking points circulated by industry trade groups, said Jeff Schurman, executive director of the Title Appraisal Vendor Management Association, itself a professional organization representing AMCs.

>”The way they tell the story, it sounds like we’re a bunch of cowboys who have come on the scene to take advantage of the situation,” he said. “We’ve been around since the 1960s.”

Yes that’s true Jeff, but it became an issue on May 1 when HVCC was implemented. The 1960’s cowboy analogy is like saying the Internet has been around since the 1960s.

Technically a true statement but a wildly misleading reference (much like many AMC appraisals).


  1. [NAHB] 26% Of Appraisals Faulty While AMC’s Talk Parrots | Realty Estate News July 14, 2009 at 6:17 am

    […] See the rest here:  [NAHB] 26% Of Appraisals Faulty While AMC’s Talk Parrots […]

  2. Edd Gillespie July 14, 2009 at 8:51 am

    Oh goody. Now the appraisers can join in the circle of blame, except for those who work through those diabolical AMCs. The buck stops there? I don’t think so.
    The problem in appraising for residential mortgages started when Fannie Mae wrote her version of appraising + USPAP and the appraisal industry took it seriously. Now Fannie has taken over the care and feeding of the AMCs. And I lost my bet that HVCC would ever see the light of day. The AMCs are a niche business that secondary lenders want. Time for the Builders and Realtors to understand this is a lender generated and maintained problem. They would see better appraisals (as if that is what they want) if the lenders would order the appraisal early in the transaction and be willing to pay a decent fee and give enough time for a quality process to work.
    So NAR and NAHB, it has to do with where your buyers go for a loan. Steer them away from the Fannie addicts.
    Course, nobody ever wants an appraisal anyway, they just want to know what it is worth.
    And I agree that the NAR/NAHB definition of “good appraisal” must be synonymous with “deal maker.” But, that is nothing new. What is new is that you agree with them in their perception that quality dropped since May 1. May had to do with HVCC. The AMCs have been running the residential mortgage show for quite awhile. As horrible as AMCs and HVCC are, I thought we agreed the real problem is that the economy still has the flu.
    Jonathan, please start a topic that has to do with the economy recovering. I got educated to new way of thinking about it, had an epiphany of sorts and need to blog it in the appropriate context. Talking about the economy in the middle of a NAR/NAHB rant is like the symphony playing at a rave.

  3. msn July 15, 2009 at 4:55 pm

    Headline a bit misleading. Article say 26% of builders have seen a deal fall through (at least one).

    The actual number of appraisals which scuttle deals is likely very small, < 5%.

    • Jonathan J. Miller July 15, 2009 at 4:58 pm

      Yes – I agree. And I was harsh on the parrot as well.

  4. Magnetic Material July 16, 2009 at 11:19 pm

    The parrot looks great.

  5. Edd Gillespie July 17, 2009 at 9:07 am

    I have the impression that 99%+ of what goes around in the real estate conversation is parrot talk. Maybe that just happens out here in the boonies.

    This blog is refreshing and relevant if for nothing more because it identifies the parrot-ease and the parrots who speak it.


    Is it also not possible that some of those <5% appraisals killing deals are telling it exactly like it is, and some of those deals contain fluffy stuff that isn’t real estate? Some builders around here have been known to pump stuff from time to time and then blame the appraiser when it is revealed, but maybe in the post sub prime melt down all builders have become fully accountable and don’t do that any more.

  6. Sechel July 24, 2009 at 7:54 am

    So because appraisers are not validating the price of the developer the appraisal is faulty?
    I find this absurd. In the NYC area I continue to see new developments offering prices above ACRIS reported secondary market prices of similar units.

    The move by Fannie Mae and Freddie Mac in support of appraisers linked to professional associations like the Appraisal Institute is a positive Jonathon. I’m surprised you are not more supportive. What would you like to see broker opinions???

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