NEWS
 
Home Appraisal Guidelines Add Flexibility for Valuing Electronics.

Federal Reserve issues new guidelines for evaluating homes that will hopefully help integrators and homeowners.

By Jason Knott
October 25, 2010


Integrators have too often seen expensive home theaters and other electronics be ignored by appraisers

Hopefully, that is a thing of the past. The Federal Reserve has a new interim rule on appraisals that allow homebuilders, integrators and homeowners to ask an appraiser to consider additional information about a property.

The National Association of Home Builders (NAHB) is praising the new guidelines, saying it "provides transparency in the appraisal process with sufficient flexibility to address the unique aspects of valuing new homes."

"The interim rule makes it clear that homebuilders and others can ask an appraiser to consider additional information about a property, including information about additional comparable properties," says Joe Robson, NAHB's immediate past chairman and a homebuilder from Tulsa, Okla. "That's critical to our members because in far too many cases we're seeing appraisals based on inappropriate comparables."

The Federal Reserve unveiled the interim rule on Oct. 18 and the rule will take effect 60 days after it is published in the Federal Register, with the Fed accepting comments on the interim rule during this period. Compliance is voluntary until April 1, 2011. The Fed's action was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law on July 21, 2010.

"Many appraisers do not understand the impact of new code requirements, new green building practices and other aspects of new construction that add value to a home," Robson says. "It is particularly important that home builders be allowed to provide appraisers with information to assist in appraising new construction.

"Accurate appraisals are critical to the residential construction industry because flawed appraisals can jeopardize sound projects," Robson says. "In the current economic climate it is already difficult to find financing for acquisition, development and construction, or AD&C. One appraisal that doesn't represent the true value of a property can start a chain of events that can put a builder out of business."

The Federal Reserve's interim rule also includes conflict-of-interest guidance that prohibits loan officers and mortgage brokers from selecting appraisers. It also mandates the reporting of negligent appraisals and appraiser misconduct to the appropriate state appraiser licensing authorities and requires those seeking an appraisal to pay appraisers at a rate that is reasonable and customary in the geographic market where the property is located.

   

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