NAHB to Appraisers: Stop Using Distressed Sales in Comps

The National Association of Home Builders is speaking out against the use of foreclosures, short sales, and other distressed properties used as comparables to new-home in appraisals.

In a speech to the Appraisal Institute in August, NAHB Chairman Bob Nielsen told appraiser attendees that the use of distressed sales as comparables in new-home sales was not appropriate and is causing home prices to plunge.

“By definition, distressed properties are not comparable to a new home. They are fundamentally different,” Nielsen said.

Nielsen said that unlike most older homes, new homes reflect current building codes, often boast “green” and energy efficient features, and are in move-in condition. Distressed properties often suffer from neglect due to deferred maintenance or vandalism, Nielsen said.

Nielsen also stressed that “green” and energy efficient features need to be recognized more by the appraisal system.

Source: “Distressed Properties Don’t Compare With New Homes, Nielsen Tells Appraisers,” National Association of Home Builders (Nov. 7, 2011)