The appraisal, either from the buyer or seller’s standpoint, is a point in a real estate transaction full of pitfalls. Technical complexities, consumer expectations, personal biases and tight timing all combine to potentially sink an otherwise agreeable sale. While there are already plenty of regulations around appraisals, the current model is still criticized for its subjectivity and propensity to create and compound racial biases.
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Similar to MLS services, the reliability of any appraisal valuation is only as good as its source data (of course, coupled with proper analytics). As a federal interagency panel begins considering new rules — all market participants should be concerned for some of the “appraisal processes” they’re advocating inherently and significantly increase risk to the entire system (from a collateralized risk standpoint), increase risk to realtors and sellers (by requiring unvetted / unlicensed property data collectors into client’s homes and/or utilizing “desktop” appraisers to value a home site-unseen – “potentially 3 states away with limited local field competency”), increase risks to Buyers (via an inaccurate valuation), and increase risk to lenders (via potential FNMA/Freddie repurchase requirements). And contrary to popular belief… appraisals are not insured.