The Appraisal Institute has apparently had enough and has decided to fight back against what it perceives as unwarranted blame for depressed home prices.  In a press release the Institute says, " Don't blame the real estate appraiser if it turns out that house you're trying to sell or buy isn't worth what you thought it was."

Speaking for the Institute, its president Sara W. Stephens, MAI said that real estate agents, homebuilders and others have placed blame for the market's distressed condition on appraisers who produce opinions of value that don't match a home's listing, contract or sales price, delaying a recovery in the housing market and called that accusation "nonsense."

"The fact is that appraisers are undertaking the same thorough research and thoughtful analysis that they always have in order to continue producing reliable, credible opinions of value," Stephens said. "Don't shoot the messenger."

It is unclear why the Institute decided to refute the claims about appraisers at this time.  We did a search and found a number of articles with the blame appraisers theme, but none that were more recent than last summer except for charges from the National Association of Realtors that low appraisals are among the reasons for recent high levels of sales contract cancellations.  NAR, however, has been complaining about low appraisals since at least the spring of 2009. 

Noting that buyers and sellers often have emotional value attached to a home or are unaware of the market, Stephens pointed out that appraisals completed for mortgage transactions are used to assist lenders, who are the clients, not buyers or sellers, in making lending decisions - and are not intended to confirm a listing, contract or sales price. There's no reason to assume the contract price is the "correct" price simply because it's higher than the appraisal, she said.

As to the claim that appraisers are using distressed sales as comps for market rate properties, Stevens said that qualified appraisers know how to handle adjustments for distressed properties and added that in some markets, distressed sales are so prevalent that it would be improper not to use them as comparables.

The Institute also released two handouts.  The first explains the process of conducting an appraisal in a declining market and includes a discussion of how an appraiser discounts a distressed comp. The second handout attempts to explain what an appraisers job really is, making the points that:

  • Appraisals aren't intended to confirm a home's sales price.
  • Appraisers don't set the real estate market; they reflect what's happening in the market.
  • Appraisers work not for buyers or sellers, but for lenders.
  • Appraisers are independent, third-party experts with no motive to be biased.
  • Appraisals sometimes are assigned to the least qualified, least competent appraisers, but especially in a distressed market, competent and qualified appraisers - such as designated members of the Appraisal Institute - should be hired for difficult assignments.
  • Appraisers know how to use distressed sales as comparables.