Appraisal Institute Lashes Back at NAR

The National Association of Realtors' (NAR's) chief economist, Lawrence Yun, publicly stated earlier this week that “poor appraisals” are stalling home sales. In announcing NAR's numbers for home resales in May, Yun said, “Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”

Yun's remarks have drawn the ire of appraisers. The Appraisal Institute immediately issued a statement in response to Yun's commentary on Tuesday, saying, “We take offense with the notion that an appraisal is only good if it happens to come in at the sales price. That mentality helped cause the mortgage meltdown to begin with. The fact that the value reflected in the appraisal does not match the sales price is not the fault of the appraisal but a result of the market today.”

Bill Garber, director of government and external relations at the Appraisal Institute, said, “Appraisers provide lenders with objective information and value opinions that help protect them from making questionable loans and investments and help them minimize risk. However, that should not suggest a bias toward lower valuation. Appraisers reflect the market, and sometimes, the markets don't act like we want them to or hope they will. Nonetheless, competent and professional appraisers understand this and develop credible estimates of value that ultimately help ensure that lenders loan the proper amount, buyers don't pay too much, and sellers get a fair price.

According to Yun, though, lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales. He said, “In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”

The Appraisal Institute did say in its statement, "In these complex markets, it is particularly important that lenders use only the highest caliber of appraisers,” pointing out that members of its organization who holding an MAI, SPRA, or SRA designation have met extensive experience and education requirements and must comply with the Code of Professional Ethics and Standards of Professional Appraisal Practice.