Appraisal problems have become a huge problem in real estate. The problems are caused by new appraisal rules called HVCC. Here’s the take from Jack Guttentag.

Appraisals are informed judgments regarding the value of specific properties. They are not perfect because appraisers must work with incomplete information. Further, appraisers are subject to bias, the more so the less complete the information available to them,

During periods of rising house prices, such as 2000-2006, many appraisers erred on the upside, because they were part of a community that expected further price increases.

Now, appraisers are erring on the downside.

In sum, the HVCC ” cure” for the appraisal problem of over-valuation has been implemented in a market where the problem has become under-valuation, and HVCC is making that problem much worse.