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Advocacy
References
Appraisal and Valuation: The Basics
What You Should Know about Real Estate Valuation (Investopedia, Jul. 19, 2023)
“Value is not necessarily equal to cost or price. Cost refers to actual expenditures – on materials, for example, or labor. Price, on the other hand, is the amount that someone pays for something. While cost and price can affect value, they do not determine value. The sales price of a house might be $150,000, but the value could be significantly higher or lower. For instance, if a new owner finds a serious flaw in the house, such as a faulty foundation, the value of the house could be lower than the price.”
What is an appraisal? (National Association of Appraisers, Jul. 2, 2023)
The National Association of Appraisers explains appraisal basics on its "What is An Appraisal" information sheet.
The Cure for Appraisal Gap Anxiety (HousingWire, Mar. 24, 2023)
“An appraisal gap is the difference between what a buyer agreed to pay for a home in a purchase contract and what an appraiser concludes as the fair market value of the property. This is usually viewed as a problem when the appraised value is below the purchase contract amount since lenders will not approve a loan amount higher than the appraisal. And homebuyers certainly don’t want to overpay and start off their ownership journey with negative equity.”
Home Appraisals: Your Key to a Successful Refinance (Investopedia, Jul. 31, 2022)
“An appraisal is a professional opinion of your home’s value and is an important step in the home-buying process. Appraisals are conducted by licensed or certified professionals, who provide opinions as unbiased third parties. The appraiser gets paid for valuing your home but has no skin in the game when it comes to whether you qualify for a mortgage or refinance as a result of their estimate.”
What REALTORS® Should Know About Desktop Appraisals (Real Trends, Feb. 23, 2022)
“Desktop products are built around technology that enables appraisal professionals to work faster and more efficiently, which ultimately helps real estate professionals close deals more quickly. Due to the increased efficiency and time savings, appraisers should be willing to earn a smaller fee for their work. This cost savings is passed along to the end-user for a service that’s more efficient and accurate.”
Appraisal and Fair Housing
The National Fair Housing Alliance Applauds FHFA’s Continued Leadership in Combating Appraisal Bias (National Fair Housing Alliance, Jan. 17, 2024)
“FHFA’s most recent analysis is consistent with numerous news stories as well as research by Fannie Mae, Freddie Mac, Drs. Junia Howell and Elizabeth Korver-Glenn, Dr. Andre Perry and the Brookings Institution, and NFHA that document the serious and systemic problem of appraisal bias for consumers and communities of color. Appraisal bias exacerbates the large and growing Black-White and Latino-White wealth gaps by causing families of color to lose out on homeownership opportunities or get lower valuations.”
Appraisal Bias Undervalues Homes and Robs Homeowners of Equity — Here's How To Spot It (Business Insider, Dec. 28, 2023)
Bias in the appraisal process strips homeowners of wealth and hurts the values of neighboring homes.
Studies show that homes in areas with mostly residents of color are often undervalued compared to homes in majority white areas.
Red flags that could indicate discrimination include mentions of an area's racial makeup or poorly chosen comps.
Fair Housing & Appraisal Bias (Appraisal Institute, Oct. 25, 2023)
“The Appraisal Institute is the leading professional association of real estate appraisers. The Appraisal Institute’s Code of Professional Ethics and Standards of Professional Practice comprise requirements for ethical and competent practice, and advance equal opportunity and nondiscrimination in the appraisal profession. The Appraisal Institute’s work includes an array of professional education and advocacy programs, and stewardship of the highest level professional credentials in residential and commercial real estate appraisal.”
Protecting Homeowners from Discriminatory Home Appraisals (Office of Public Affairs, U.S. Department of Justice, Mar. 13, 2023)
The CFPB administers and enforces federal consumer financial protection laws like the Equal Credit Opportunity Act (ECOA), which is a landmark civil rights law that protects individuals against discrimination in accessing and using credit. These protections apply to every aspect of a credit transaction with a mortgage lender, including the important step of mortgage lenders relying on home appraisals before approving a loan.
The Department of Justice (DOJ) enforces both ECOA and the Fair Housing Act (FHA), which protects individuals from many forms of discrimination in housing, including discriminatory residential valuations conducted by appraisers and the use of those appraisals by mortgage lenders.
Black Couple Settles Lawsuit Claiming Their Home Appraisal Was Lowballed Due to Bias (NPR, Mar. 9, 2023)
“This time the couple decided to "white wash" the house. They removed family photos and art work, books, hair products and anything else that might indicate that a Black family lived there. They also asked a white friend to be present at the house and greet the appraiser as if she were the homeowner and to display some of her family photos in the house. The Austins were not at home during the appraisal. The new appraiser concluded the house was worth $1,482,500 – nearly half a million dollars higher than Miller's estimated value.”
Window to the Law: Ensuring Impartial Appraisals (National Association of REALTORS®, Feb. 7, 2023)
“Real estate transactions rely on an objective appraisal to determine a home’s market value, but evidence suggests there’s potential for racial bias in the appraisal process. Learn more about the Property Appraisal and Valuation Equity action plan to eliminate racial and ethnic bias in home valuations and find tips to ensure an impartial appraisal.”
How Three Black Woman Hope to Change the Home Appraisal Industry (The New York Times, Jan. 18, 2023)
“In the event that a Black homeowner has an appraisal that comes in low and they don’t have a family member who is a Black appraiser, the information they have available to them usually comes either from someone who isn’t an actual appraiser, but is trying to offer advice on the appraisal process. Or if that person is an appraiser, they might be concerned about bias, but they aren’t a person of color themselves. Black appraisers in this space are generally still only talking about how to become an appraiser in the first place. There wasn’t anybody in the space who was a Black appraiser speaking to Black homeowners about the specific issues they face. I can step into that space and provide guidance.”
Fact Sheet: Biden-Harris Administration Releases Action Plan to Address Racial and Ethnic Bias in Home Valuations (The White House, Mar. 23, 2022)
“On June 1, 2021—the centennial of the Tulsa Race Massacre—President Biden announced the creation of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) to develop a transformative set of actions to root out racial and ethnic bias in home valuations. Today, the Task Force is releasing the PAVE Action Plan which, when enacted, represents the most wide-ranging set of reforms ever put forward to advance equity in the home appraisal process. The Task Force is co-chaired by U.S. Department of Housing and Urban Development Secretary Marcia L. Fudge and Domestic Policy Advisor Susan Rice.”
Response to PAVE Action Plan (National Association of REALTORS®, Apr. 4, 2022)
“While NAR is supportive of improving diversity in the appraisal profession, there is concern that reducing education requirements in an effort to bring in a wider diversity of appraiser trainees could adversely impact the quality of appraisals going forward. Focus should be on exploring alternative paths to becoming an appraiser that do not sacrifice the quality of appraiser education and training.”
Appraisal Information Resources for NAR Members
Members of NAR enjoy appraisal education benefits, GAA and RAA designations, an online referral network, as well as representation on the Real Property Valuation Committee and the Real Property Valuation Forum. The Realtors Property Resource® (RPR®) is also available to NAR members. Members who take advantage of educational benefits and advanced valuation tools will be better positioned in the industry to succeed in their respective markets.
Appraiser Independence
NAR's Appraiser Independence page provides NAR's position on appraiser independence, background on the issues, and resources for communicating with appraisers.
Appraisers are sometimes asked by lenders and AMCs to include distressed transactions as comparable sales, to complete the appraisal in unreasonable and unrealistic time spans, and comply with a scope of work not justified by the fee being offered. NAR believes this interferes with appraiser independence, causing harm to the real estate recovery, and harm to consumers.2
In February 2012, NAR released its Responsible Valuation Policy, which supports and encourages credible, independent valuations of Real Property.
Appraiser/Agent Communication
Residential Appraisal Process: FAQs for Agents was developed by NAR’s Real Property Valuation Committee for agents who are interested in educating prospective homebuyers about appraisals. NAR has found that confusion persists about appraisal regulations, especially those that affect how real estate agents and their clients communicate with appraisers. Frequently asked questions include “Can I speak to the appraiser?” and “What kind of information should I provide to the appraiser?”
Charlie Lee, from NAR Legal Affairs gave us a Window to the Law: Working with Appraisers video in Dec. 2018, in which he discussed the regulatory background of appraiser independence rules, the different roles of appraisers and real estate agents, and then covered some best practices.
Appraisal Management Companies (AMCs)
An Appraisal Management Company (AMC) works with lenders and appraisers to facilitate the ordering, tracking, quality control, and delivery of appraisal reports. Please read NAR's issue brief to find frequently asked questions and answers about Appraisal Management Companies.
NAR supports the regulation of AMCs through the Financial Institutions Reform and Recovery and Enforcement Act (FIRREA), with state implementation and enforcement. NAR opposes the use of indemnification clauses by AMCs and will pursue legislative and regulatory efforts to require AMCs to retain competent and qualified appraisers.
NAR supports a more standard process to request a reconsideration of value if the original value opinion is not credible. Better communication could help a real estate broker or salesperson understand whether an appraisal is credible. Also, any AMC that is violating USPAP should be reported to the appropriate authority. Good AMCs should want the bad ones out of business.
On May 24, 2018 NAR Real Property Valuation Committee Chair Rebecca Jones and Vice Chair David Griffith talked about NAR's appraiser independence policy and a paper published by the Federal Housing Finance Agency in May on appraisal management companies and appraisals they order.
1 The Appraisal Foundation, A Guide to Understanding a Residential Appraisal (Washington, DC), 3, www.appraisalfoundation.org
2 NAR Statement on Appraiser Independence, April 2011
3 Data on appraisal issues are from a monthly survey for the REALTORS® Confidence Index, posted at www.nar.realtor
eBooks & Other Resources
Appraising the Appraisal (eBook)
The Performance Appraisal Handbook (eBook)
Real Estate Appraisal (eBook)
The Art of Real Estate Appraisal (eBook)
Valuing a Business (eBook)
How to Get Started in the Real Estate Appraisal Business (eBook)