Home values are being pushed lower thanks to an increased number of previously foreclosed and distressed comparable sales showing up on appraisals, according to the National Association of Home Builders.
The group argues that many appraisals aren’t taking into account differences in condition between well maintained homes and those that are distressed; one reason being appraisers often aren’t able to enter the foreclosed homes to examine their interiors, which could be badly damaged.
“Any home buyer can recognize the difference between a well-kept home and a distressed property that is damaged or not properly maintained,” said NAHB Chairman Joe Robson, in a release.
“So it only makes sense that an appraiser should be required to consider the overall condition of a property and the specific factors related to a foreclosure or distressed property sale when selecting and adjusting the value of comparables.”
The builders have suggested that appraisers be given an expanded geographical area and/or an extended time frame for recent sales to assess home values in areas riddled with foreclosures.
“Currently, improper or insufficient adjustments to the comparable values of foreclosed and/or distressed homes often results in the undervaluation of new sales transactions,” the group said in a release.
“This practice must be corrected because it contributes to the continuing downward spiral in home prices, forestalling the economic recovery,” said Robson.
It also makes it more difficult to sell homes, or allow current homeowners to refinance, as appraisers aren’t coming up with that “right” value as often.
The NAHB believes there should be proper regulatory guidelines in place for appraisers who use distressed or foreclosed properties as sales comparables when determining home values.
Funnily enough, most of the neighborhoods riddled with foreclosures are new developments owned by the nation’s top home builders…