Homebuilders Having Appraisal Problems

Nearly 60% of homebuilders are running into problems with appraisals and 26% of the builders surveyed said they have seen sales contracts fall through because the appraisals are coming in below the contract price, according to the National Association of Home Builders. The "biggest problem," NAHB says is that appraisers are using foreclosures and distressed sales as comparables for new single-family homes. Freddie Mac has reiterated in a July 10 Bulletin that it does not require appraisers to use foreclosures or short sales as comparables. And appraisers must certify that they are using comparables "most similar" to the property. NAHB called this a "step in the right direction." But Freddie did not rule out the use of distressed sales as comparables. "If the appraiser determines these are representative of the properties available to typical purchasers for the market in which the property is located, appraisers must consider their use," the bulletin says.