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The attorney general of Texas recently ruled that home appraisers must take into consideration neighboring foreclosed properties when determining the fair-market value of a home.

In years past, the state comptroller’s property-tax-assistance division operated under guidelines that state that neighboring foreclosed properties should not be included in the fair-market-value analysis of a home being appraised. The result of refusing to use foreclosed homes in the neighborhood appraisal was that it would inflate the value of the home the buyer is trying to buy.

The Texas Legislature addressed this issue in 2009 after the housing markets dropped and foreclosures increased. Now the attorney general issued this opinion to make sure homeowners trying to sell their property and those trying to buy it will be making decisions based on accurate appraisals.

For this reason, we can’t seem to get out of the never ending loop. Buyers are willing to pay more, sellers want more, but appraisers have to use the foreclosures in appraisals so the house appraises for the less, the seller has to sell it for less, and the buyer pays less. This is why even in neighborhoods where the values seem to be going up and the foreclosures are down, sellers continue to sell low. They are being forced to by appraisals. It is a very frustrating issue for Realtors.

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