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WSJ: Appraisals Are Bringing Housing Down

The appraisal system is broken, a Wall Street Journal article asserted last week. Low appraisals, whether the result of intentionally conservative lending practices or simply unprecedented bad times for home prices, WSJ says, are preventing the real estate market from rebounding.

“One of the conclusions from the housing bust: The appraisal system was broken,” WSJ writes. “One of the conclusions some have drawn from the struggling recovery since then: The appraisal system is still broken, but in a different way.”

While some believe that low-ball appraisals and a downward bias from those who conduct them is inhibiting the housing recovery, still some others think that lenders are instructing appraisers to be more conservative, which may be exacerbating the problem, says WSJ. Mortgage Bankers Association senior vice president Steve O’Conner told the WSJ that “There’s an extra note of caution,” on the part of appraisers.

Additionally, the article cites an example of a valuation that came in around half of what was expected by the realtor, noting that disputes over valuations are rising and that appraisers are increasingly using automated valuation models, or AVMs to determine home values based on reams of property data, and public and privately compiled databases.

Read the Wall Street Journal article.

Written by Elizabeth Ecker

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