Not long ago they were the punching bags of American real estate, accused of rank incompetence, wrecking home sales and failing to pick up on signs of the housing turnaround.
That was then. Today appraisers are suddenly getting much more favorable reviews.
But wait a minute: Have appraisals actually improved in accuracy in any measurable way over the past several years? Nobody really knows. There are no nationally published statistical audits that gauge appraisal accuracy. However, one major industry group regularly surveys its members’ sentiments on appraisals, and lately things have been looking up.
When the National Association of Realtors conducted polls sampling its million-plus members in the spring and summer of 2010, more than 40 percent of respondents reported having problems with appraisals.
Within the realty field, criticism of appraisers was rampant and scathing. Appraisers allegedly too often:
• Used rock-bottom priced foreclosures and short sales as “comparables” for valuing houses where there was no financial distress. Those low appraisals blew up perfectly good sales or forced angry sellers to renegotiate prices with buyers.
• Traveled long distances beyond their areas of geographic competence, and inevitably were out of touch with local conditions.
• Paid scant attention to evidence that local home prices were on the increase, such as pending contracts, numbers of properties that sold for above list or that experienced multiple bids.
Worst of all, critics charged, poorly trained appraisers who had flooded into the industry during the boom years now were getting the bulk of the valuation assignments from appraisal management companies – primarily because they would work for cut-rate fees.
In the latest monthly survey, NAR pollsters found that just 24 percent of members reported having significant issues with appraisal results. Granted, that’s still nearly a quarter of all agents in the sample. But it’s down significantly from where it was a few years ago.
What to make of this? Have there been changes in the appraisal industry itself that might explain the better reviews out of former critics? Appraisers I interviewed in different parts of the country agree on one key fact: The dramatic decrease in foreclosures and short sales during the past 18 months has cut the number of houses with depressed prices that appraisers can choose – or justify – as comparables for any given sale.