Don’t blame the real estate appraiser if it turns out that house you’re trying to sell or buy isn’t worth what you thought it was.
That’s the message from the Appraisal Institute, the nation’s largest professional association of real estate appraisers.
Real estate agents, homebuilders and others have laid blame for the market’s distressed condition on appraisers, saying that they are at fault for producing opinions of value that don’t match a home’s listing, contract or sales price, delaying a recovery in the housing market.
Appraisal Institute President Sara W. Stephens, MAI, called that accusation “nonsense.”
“The fact is that appraisers are undertaking the same thorough research and thoughtful analysis that they always have in order to continue producing reliable, credible opinions of value,” Stephens said. “Don’t shoot the messenger.”
Noting that buyers and sellers often have emotional value attached to a home, or are unaware of the market, Stephens pointed out that appraisals completed for mortgage transactions are used to assist lenders in making lending decisions — and are not intended to confirm a listing, contract or sales price.
There’s no reason to assume the contract price is the “correct” price simply because it’s higher than the appraisal, she said.
Stephens also noted that appraisers’ clients are lenders, not buyers or sellers. She said appraisers are independent, third-party experts with no motive to be biased.
“Appraisers don’t set the real estate market; they reflect what’s happening in the market,” Stephens said.
“Think of the appraiser as a mirror, reflecting the market. Obviously, the market is depressed — home prices have fallen far below the values of a few years ago. Many homes simply aren’t worth what their owners think they are.”
Stephens said that, especially in a distressed market, competent and qualified appraisers with local market knowledge — such as designated members of the Appraisal Institute — should be hired for difficult assignments.
“Designated members of the Appraisal Institute have achieved levels of education, experience, standards, ethics and peer review above those of licensed or state certified appraisers,” she said. “They are particularly valuable when facing challenging assignments like those found in today’s market.”
She also said competent and qualified appraisers know how to use distressed sales, such as foreclosures, as comparable sales when determining a reliable, credible opinion of value.
“Qualified, competent appraisers are capable of using their experience and education to determine when — and how — to use distressed sales as comparables,” Stephens said. “These appraisers know what adjustments to make, if any, when using distressed sales as comparables.”
She added that, in some markets, distressed sales are so prevalent that it would be improper not to use them as comparables.