Flawed Appraisals Killing More Deals, NAHB Says
In many recent cases, new homes are being appraised for less than the cost of construction, according to the National Association of Home Builders. Builders are blaming flawed appraisals for holding back the housing market’s recovery.
Builders say that new homes should not be compared to foreclosed homes that have sat vacant and are in disrepair.
“The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices, killing home sales, causing more workers to lose their jobs and delaying a housing and economic recovery,” said NAHB Chairman Bob Nielsen.
Sixty percent of builders say they were experiencing problems with appraisals coming in below their contract sales price, according to a recent survey by NAHB. One out of three new-home builders say they’ve had signed sales contracts canceled in the last six months because appraisals on their homes are less than the contract sales price. In a separate study by the National Association of REALTORS® from June, 16 percent of real estate professionals also reported an increase in deals being canceled mostly due to low appraisals, too.
“This is not only unfair and unreasonable, but it perpetuates the cycle of declining home values, drives more home owners underwater, harms local economic activity and acts as an obstacle to the recovery of the housing market,” Nielsen said in a statement.
NAHB is calling on regulators to make major reforms to appraisal practices and oversight to prevent flawed appraisals from continuing to hamper a housing market recovery.
Source: National Association of Home Builders