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According to a report earlier this month from the Government Accountability Office (GAO), the Appraisal Subcommittee, which oversees the appraiser regulatory programs established by each state, needs to improve its monitoring procedures. A faulty appraisal process is believed to be hurting home values and hampering a full housing recovery.

The GAO report found the Appraisal Subcommittee’s “enforcement tools and procedures for reporting compliance levels have been limited.” The GAO cited “several weaknesses” that have potentially limited the subcommittee’s ability to monitor state appraiser regulatory agencies, the federal financial institution regulators and the Appraisal Foundation, a private, non-profit corporation that sets criteria for appraisals and appraisers.

Under the Dodd-Frank Act, the Appraisal Subcommittee was granted the authority to establish a national hotline to receive complaints over noncompliance with appraisal independence standards and grievances from appraisers, individuals or other entities over attempts to improperly influence appraisers or the appraisal process. Currently, no such hotline exists and the GAO report states that the creation of a national hotline could strain the Appraisal Subcommittee’s resources.

The National Association of Home Builders (NAHB) believes that an effective oversight system needs to be put in place to ensure that appraisals accurately reflect market values. How homes are valued can have a dramatic effect on homeowners’ mortgages, foreclosure rates, the health of banks and, ultimately, the condition of the U.S. financial system, says NAHB.

A recent NAHB survey shows that one out of three builders have lost signed sales contracts because of flawed appraisals and a fall survey conducted by the National Association of REALTORS® shows that 18 percent of REALTORS® reported a recent contract cancellation or delay as a result of a low appraisal.

Numerous flaws in the appraisal system have been causing inaccurate home valuations, both in times of housing weakness and strength, says NAHB. NAHB has been actively seeking improvements in appraiser education and training, particularly for appraisals of new homes, as well as more rigorous oversight so appraisal guidelines are enforced and errors can be corrected as they occur.