Defends Appraisers’ Conservative Practices

Don G. Campbell’s article on low appraisals and their effect on the current real estate market was interesting, albeit incomplete in at least one respect.

Realtors, it seems, are quick to blame appraisers for appraisals that may be less than a property’s selling price, without noting that guidelines imposed by lenders and secondary-market participants affect the content of an appraisal report to a significant degree.

Joel Singer, research director of the California Assn. of Realtors, accuses appraisers of “missing the trend,” and being “slow in realizing that the market is heating up.”

Nothing could be further from the truth. Appraisers are forced to deal with many arbitrary guidelines, probably the most restrictive of which, in terms of current market conditions, is the requirement that at least three comparables be closed sales within six months of the date of the value.

In a rapidly increasing market, such as we have seen since about the first of the year, it has been difficult, and in some cases impossible, for appraisers to support these higher prices on the basis of valid historical data alone, with primary reliance on pending sales apparently a problem for many lenders.

It was correctly noted that realtors are frequently reluctant to provide detailed information on sales which have not yet closed escrow. Appraisal guidelines were a well-intentioned attempt to prevent abuses common during the speculative market during the late ‘70s and early ‘80s, but some of these have instead hampered truly qualified appraisers who are asked to provide valuations which are reflective of the current market.

Rather than impose arbitrary guidelines, which often force an appraiser to eliminate the best comparables, perhaps lenders should try harder to find qualified appraisers and allow them the flexibility they need to do their job properly.

MICHAEL V. SANDERS

Tustin

Sanders is a real estate appraiser.