Fran Gregoire, former chair of the Real Property Valuation Committee at the National Association of Realtors (NAR), recently told the U.S. House of Representatives Financial Services Subcommittee on Insurance, Housing and Community Involvement that the appraisal industry is facing many challenges. He indicated that appraisals are not only important but also often overlooked while attention focuses on other aspects of the housing market.
“Appraisers are facing undue pressure by [Appraisal Management Companies] to complete appraisals using distressed transactions as comparable sales, to deliver completed appraisal reports faster, and do a greater scope of work for a lower fee than a competing vendor,” said Gregoire. Coupled with other factors, the result is that appraisers find it difficult to maintain their independence, objectivity and the quality of their work.
Low appraisals may benefit buyers, but investors and owner-occupiers alike could find themselves experiencing disadvantages after making a purchase if values are underestimated. Appraisals could impact the rents that property management companies are able to charge tenants or the price of re-selling a property, affecting investors.