Appraisals Are Still a Big (but Different Kind of) Mess

Just as overly generous property appraisals fueled a bubble that led to the housing bust, now overly stingy appraisals are keeping the American economy in the doldrums, reports the Wall Street Journal. The problem is causing increasing disputes over valuations, with sale cancelations jumping to 16% in June from 9% in June of last year, a bump one economist attributes to low appraisals. Some blame more conservative mandates from the banks. Others point to new rules in the aftermath of the bust that are designed to free appraisers from the influence of real estate agents or mortgage brokers—but that often lead to prices far below what buyers and sellers are willing to agree to.

But perhaps the biggest problem with the new appraisal system is that banks are now outsourcing the work to appraisal-management companies, who take a chunk of the fee. What it's led to is fewer appraisers with less knowledge of their markets trying to do more work cheaper and faster. The number of licensed appraisers had dropped about 10,000 to fewer than 90,000 nationwide since 2007. "We've lost the best quality appraisers," says the president of an appraisers' trade group. Still others have a simpler explanation. "It's the market," says one appraiser. "It's not the changes."