Appraisal and Valuation: The Basics
What Is A Drive-By Appraisal And How Accurate Is It? (Rocket Mortgage, Oct. 31, 2024)
A drive-by appraisal, also sometimes referred to as a summary appraisal, is an alternative type of home appraisal during which an appraiser examines only the property’s exterior. To determine the home’s fair market value, the appraiser will consider the results of the appraisal and all available real estate records and data.
What Is A Desktop Appraisal And How Does It Work? (Rocket Mortgage, Jul. 29, 2024)
A desktop appraisal is a property valuation that is completed at the appraiser's desk, using third party data such as tax records or information listed on the multiple listing service (MLS), instead of an interior/exterior inspection of the property.
What You Should Know about Real Estate Valuation (Investopedia, Aug. 10, 2024)
“Value is not necessarily equal to cost or price. Cost refers to actual expenditures – on materials, for example, or labor. Price, on the other hand, is the amount that someone pays for something. While cost and price can affect value, they do not determine value. The sales price of a house might be $150,000, but the value could be significantly higher or lower. For instance, if a new owner finds a serious flaw in the house, such as a faulty foundation, the value of the house could be lower than the price.”
Home Appraisals: Your Key to a Successful Refinance (Investopedia, Jun. 12, 2024)
“An appraisal is a professional opinion of your home’s value and is an important step in the home-buying process. Appraisals are conducted by licensed or certified professionals, who provide opinions as unbiased third parties. The appraiser gets paid for valuing your home but has no skin in the game when it comes to whether you qualify for a mortgage or refinance as a result of their estimate.”
What is an appraisal?pdf (National Association of Appraisers, Jul. 2, 2023)
The National Association of Appraisers explains appraisal basics on its "What is An Appraisal" information sheet.
The Cure for Appraisal Gap Anxiety (HousingWire, Mar. 24, 2023)
“An appraisal gap is the difference between what a buyer agreed to pay for a home in a purchase contract and what an appraiser concludes as the fair market value of the property. This is usually viewed as a problem when the appraised value is below the purchase contract amount since lenders will not approve a loan amount higher than the appraisal. And homebuyers certainly don’t want to overpay and start off their ownership journey with negative equity.”
Appraisal and Fair Housing
FHA Rescinds Multiple Appraisal-Related Policies (National Association of REALTORS®, Mar. 21, 2025)
On March 19, 2025, the Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2025-08, Rescinding Multiple Appraisal Policy Related Mortgagee Letters, to immediately rescind the policy guidance published in the following MLs:
- ML 2024-16, Extension to the Effective Date of Appraisal Review and Reconsideration of Value (ROV) Updates, dated August 6, 2024;
- ML 2024-07, Appraisal Review and Reconsideration of Value, dated May 1, 2024; and
- ML 2021-27, Appraisal Fair Housing Compliance and Updated General Appraiser Requirements, dated November 17, 2021.
Supporting Your Value: Discover AI Tools for Appraisers (National Association of REALTORS®, Jan. 30, 2025)
Appraisers face a constant challenge to provide accurate property valuations amid changing market conditions. New policies require appraisers to clearly identify market trends and apply specific time adjustments to comparable sales data based on these trends and include the methodology used to determine these adjustments in the appraisal report. But how do appraisers derive these adjustment amounts and what new technology can be used in the process? Jim Amorin, author of the Generative Shift, Preparing Appraisers For Artificial Intelligence Models Like Chat GPT, and Josh Walitt, educator and Principal Consultant at Walitt Solutions, dove into this topic exploring the various AI tools that can be used to develop adjustments and how to use them, but also how appraisers can make sure the information they are getting with those tools is accurate.
Appraisal Bias Undervalues Homes and Robs Homeowners of Equity — Here's How To Spot It (Business Insider, Jul. 22, 2024)
Bias in the appraisal process strips homeowners of wealth and hurts the values of neighboring homes.
Studies show that homes in areas with mostly residents of color are often undervalued compared to homes in majority white areas.
Red flags that could indicate discrimination include mentions of an area's racial makeup or poorly chosen comps.
The National Fair Housing Alliance Applauds FHFA’s Continued Leadership in Combating Appraisal Bias (National Fair Housing Alliance, Jan. 17, 2024)
“FHFA’s most recent analysis is consistent with numerous news stories as well as research by Fannie Mae, Freddie Mac, Drs. Junia Howell and Elizabeth Korver-Glenn, Dr. Andre Perry and the Brookings Institution, and NFHA that document the serious and systemic problem of appraisal bias for consumers and communities of color. Appraisal bias exacerbates the large and growing Black-White and Latino-White wealth gaps by causing families of color to lose out on homeownership opportunities or get lower valuations.”
Protecting Homeowners from Discriminatory Home Appraisals (Office of Public Affairs, U.S. Department of Justice, Mar. 13, 2023)
The CFPB administers and enforces federal consumer financial protection laws like the Equal Credit Opportunity Act (ECOA), which is a landmark civil rights law that protects individuals against discrimination in accessing and using credit. These protections apply to every aspect of a credit transaction with a mortgage lender, including the important step of mortgage lenders relying on home appraisals before approving a loan.
The Department of Justice (DOJ) enforces both ECOA and the Fair Housing Act (FHA), which protects individuals from many forms of discrimination in housing, including discriminatory residential valuations conducted by appraisers and the use of those appraisals by mortgage lenders.
Black Couple Settles Lawsuit Claiming Their Home Appraisal Was Lowballed Due to Bias (NPR, Mar. 9, 2023)
“This time the couple decided to "white wash" the house. They removed family photos and art work, books, hair products and anything else that might indicate that a Black family lived there. They also asked a white friend to be present at the house and greet the appraiser as if she were the homeowner and to display some of her family photos in the house. The Austins were not at home during the appraisal. The new appraiser concluded the house was worth $1,482,500 – nearly half a million dollars higher than Miller's estimated value.”
Window to the Law: Ensuring Impartial Appraisals (National Association of REALTORS®, Feb. 7, 2023)
“Real estate transactions rely on an objective appraisal to determine a home’s market value, but evidence suggests there’s potential for racial bias in the appraisal process. Learn more about the Property Appraisal and Valuation Equity action plan to eliminate racial and ethnic bias in home valuations and find tips to ensure an impartial appraisal.”
Fair Housing & Appraisal Bias (Appraisal Institute)
“The Appraisal Institute is the leading professional association of real estate appraisers. The Appraisal Institute’s Code of Professional Ethics and Standards of Professional Practice comprise requirements for ethical and competent practice, and advance equal opportunity and nondiscrimination in the appraisal profession. The Appraisal Institute’s work includes an array of professional education and advocacy programs, and stewardship of the highest level professional credentials in residential and commercial real estate appraisal.”
Appraisal Information Resources for NAR Members
Members of NAR enjoy appraisal education benefits, GAA and RAA designations, an online referral network, as well as representation on the Real Property Valuation Committee and the Real Property Valuation Forum. The Realtors Property Resource® (RPR®) is also available to NAR members. Members who take advantage of educational benefits and advanced valuation tools will be better positioned in the industry to succeed in their respective markets.
Appraiser Independence
NAR's Appraiser Independence page provides NAR's position on appraiser independence, background on the issues, and resources for communicating with appraisers.
Appraisers are sometimes asked by lenders and AMCs to include distressed transactions as comparable sales, to complete the appraisal in unreasonable and unrealistic time spans, and comply with a scope of work not justified by the fee being offered. NAR believes this interferes with appraiser independence, causing harm to the real estate recovery, and harm to consumers.2
In February 2012, NAR released its Responsible Valuation Policy, which supports and encourages credible, independent valuations of Real Property.
Appraiser/Agent Communication
Residential Appraisal Process: FAQs for Agents was developed by NAR’s Real Property Valuation Committee for agents who are interested in educating prospective homebuyers about appraisals. NAR has found that confusion persists about appraisal regulations, especially those that affect how real estate agents and their clients communicate with appraisers. Frequently asked questions include “Can I speak to the appraiser?” and “What kind of information should I provide to the appraiser?”
Charlie Lee, from NAR Legal Affairs gave us a Window to the Law: Working with Appraisers video in Dec. 2018, in which he discussed the regulatory background of appraiser independence rules, the different roles of appraisers and real estate agents, and then covered some best practices.
Appraisal Management Companies (AMCs)
An Appraisal Management Company (AMC) works with lenders and appraisers to facilitate the ordering, tracking, quality control, and delivery of appraisal reports. On February 4, 2025, NAR issued a comment letterpdf to the Appraisal Subcommittee (ASC) in response to a proposed rule on the "ASC Enforcement Authority Regarding the Effectiveness of State Appraiser and Appraisal Management Company (AMC) Regulatory Programs."
NAR policy supports independent valuations of real property performed by state credentialed appraisers in adherence with the Uniform Standards of Professional Appraisal Practice (USPAP); therefore, it is crucial that effective oversight of both appraisers and the appraisal management companies is in place and exercised. While the proposed rule codifies ways the states should oversee appraisers, it omits specific language on AMC monitoring and ways to report AMC violations.
This comment letter suggests additional monitoring, adding whistleblower protection, promoting consistency in regulation and investigation, monitoring adequacy of jurisdictions’ funding, and measurement of how effectively new rules and oversight affect compliance.
1 The Appraisal Foundation, A Guide to Understanding a Residential Appraisal (Washington, DC), 3, www.appraisalfoundation.org
2 NAR Statement on Appraiser Independence, April 2011
3 Data on appraisal issues are from a monthly survey for the REALTORS® Confidence Index, posted at www.nar.realtor
eBooks & Other Resources
Appraising the Appraisal (eBook)
The Performance Appraisal Handbook (eBook)
Real Estate Appraisal (eBook)
The Art of Real Estate Appraisal (eBook)
Valuing a Business (eBook)
How to Get Started in the Real Estate Appraisal Business (eBook)
