NAHB has added an Appraisal Primer to its pool of resources in an effort to help builders navigate through the appraisal process, according to a story in Nation’s Building News .
Appraisers have come under increased scrutiny lately, with builders across the country complaining about their new homes being undervalued, jeopardizing sales. The primer, authored by appraiser Joan Trice, addresses builders’ frequently asked questions about the process, giving tips on how to best work with appraisers through the procedures.
Below are some of the questions Trice covers and how to address them:
- How should appraisers approach homes with options and upgrades not found in the surrounding area?
Trice recommends that appraisers take a cost approach to these situations rather than the typical market approach. Taking the latter approach often leads to these features being valued at less than their cost, resulting in a loss for the builder. A cost approach treats them at face value and creates the fairest appraisal. Trice also suggests that appraisers search the market area for other, possibly older homes with the same features to estimate market value.
- Will geothermal heating and other green options be covered under the appraisal value?
With green building still a fairly new concept, homes built with these features are still few and far between. As a result, it can be difficult for appraisers to give them their proper value. At the very least, Trice says, home builders should see the additional costs of green features included in the value of the home. Ideally, calculations can be performed to see how much homeowners would save in utility costs compared to living in a standard home; however, with little hard data on maintenance and efficiency, their conclusions can’t be supported.
- What kinds of problems can arise when working with appraisers selected by national appraisal management companies (AMCs)?
Many builders have expressed dissatisfaction with AMCs, who they accuse of selecting appraisers that charge the lowest fees, even if they are nowhere near the desired market area. Trice points out that this does not necessarily mean they are not competent for the job, though. She says the best test is to see if they are familiar with the local conventional data sources. If not, find someone else.
- Does the Dodd-Frank bill prohibit communication between builders and appraisers?
Trice points out that this is not true and stresses that communication between the two parties is absolutely vital. What the bill prohibits is communication intended to coerce or inappropriately influence the appraiser; they are required, however to be prepared to answer questions, review information and make corrections.
To read the rest of the story, click here .
NAHB members can access the Appraisal Primer feature here .