Reengineering the appraisal: a return to fundamentals
A Presentation for the Collateral Risk Network Meeting

David Valdez/US Department of Housing and Urban Development

Article Highlights

  • The US is the world leader in distortionary housing policy interventions

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  • Relationship between market value based on comparable sales analysis and rental income should always be taken into account

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  • Return property appraising to its core function--assisting lenders in determining the max amount they may be lent on a property

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Reengineering the Appraisal: A Return to Fundamentals

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  • The relationship between market value based on comparable sales analysis and rental income should always be taken into account.  
  • In order to not start with the answer (sales price) this requires reporting a sales price range.
  • The comparable selection process must be transparent to the users.  
  • This process could be improved by identifying all appropriate comparables and using statistical techniques to help the appraiser select and reconcile all appropriate comparables. 
  • A collateral experat at the ledner should determine loan terms based on a review and analysis of market and stabilized values.
  • Only by taking steps such as these can property appraising return to its status as a profession and to its core function: assisting lenders in determining the maximum amount that may be prudently lent on a property. 
Edward Pinto is a resident fellow at AEI
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