Changing marketplace complicates home-valuation process

Providing accurate property valuations can be complicated.

In the session, titled “The Low Appraisal: Recourses and Remedies,” a panel of experts told Realtors how to handle a transaction in which a buyer and seller agree on a sales price that’s higher than the home’s appraised value.

Appraisals are an often-unnoticed but essential part of the home buying or refinancing process. Most lenders require property appraisals when granting mortgages to ensure that they are not lending more than a home’s value. Appraisals also protect buyers by preventing them from paying too much for a home. High appraisals can sometimes be an indication of mortgage fraud, which already has resulted in $546 million in losses in the first half of 2006, according to the FBI. Low appraisals can prevent buyers from getting a mortgage and inhibit a home sale.

NAR’s membership includes about 30,000 state-licensed and certified appraisers.

“Realtors, appraisers and lenders must work together to support the fundamentals of the lending process and to ensure that housing remains a good investment,” said NAR President Thomas M. Stevens, in a news release.

Dealing with low appraisals

Panelists also discussed factors that influence low appraisals, such as a home that has been over-improved for its neighborhood, an oversupply of properties in the area, recent neighborhood foreclosures, and the state of the region’s general economic climate.

NAR recommends that lenders be required to inform borrowers of the methods used to value a property to determine the amount of the mortgage loan, and that borrowers obtain a copy of all value estimates or value opinions on the property.

“All appraisers are bound by the Uniform Standards of Professional Appraisal Practice – USPAP – and Realtors and lenders are bound by the professional, regulatory and ethical obligations of their respective professions, as well,” said Joseph Traynor, who served as the 2004 NAR Regional Vice President for Region 7, and member of the 2006 Board of Trustees for the Appraisal Foundation. “Low appraisals can be frustrating and sometimes costly to all parties involved in the transaction, but by working together these professionals can ensure that the interests of both home buyers and sellers are protected.”