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Are appraisers partially responsible for slowing recovery?

Posted: June 25, 2009 2:37 pm.

6-25-09
Are appraisers partially responsible for slowing home sales recovery?
There's a Catch-22 that always arises when home prices start to increase near the end of a recession. Even though buyers are willing to pay more, appraisals often come in lower than the agreed-upon price because they're based on comparable sales from three to six months earlier, when prices were bottoming. Real estate agents and mortgage brokers say it's happening now, and that it's disrupting sales.
But this time they're placing the blame on new appraisal rules, the Home Valuation Code of Conduct, put into effect by Fannie Mae and Freddie Mac on May 1. At the heart of the new Code of Conduct is a rule prohibiting mortgage brokers from ordering an appraisal directly from the appraiser. They now have to go through the lender, and increasingly lenders are using third-party appraisal management companies to parcel the work out to individual appraisers.
The idea is to insulate the appraiser from pressure to inflate home values. During the housing boom, many appraisers complained that they felt pushed, directly or indirectly, by mortgage brokers and lenders to come up with home valuations that justified high sales prices. If they killed too many deals, appraisers feared mortgage brokers would take their high-volume business to someone more accommodating.

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