History

• The FHA has long prohibited its lenders from accepting appraisal reports completed by appraisers "selected, retained or compensated, in any manner by real estate agents," says HUD. The standard of appraiser independence became more stringent in 2010 when the department further prohibited lenders from accepting appraisals completed by FHA appraisers contracted by mortgage brokers. Because of high rates of default and subsequent foreclosure that began in 2007, rules against influencing appraisers have been tightened by FHA and federal law.
  
  

Realtor Ethics

• Realtors are real estate agents; however, not all real estate agents are Realtors. The trade name pertains to only those agents who are active members of the National Association of Realtors. Members are expected to abide by the association's code of ethics. The 2011 code states that Realtors cannot "provide professional services concerning a property or its value" when they have an interest in the transaction's completion, unless their interest is disclosed to all parties.
  
  

Truth in Lending Act

• The Truth in Lending Act is a federal law implemented by the Federal Reserve Board that protects consumers in their dealings with lenders and creditors. The act's appraisal independence provision prohibits "any type of collusion with, instruction to, or other improper influence" over appraisers by real estate professionals. The Home Valuation Code of Conduct -- a set of federal guidelines for appraisers -- also prohibits agents from ordering appraisals. Although the act does not directly do this, its appraisal independence requirement indirectly prohibits Realtors from providing comparable properties to an appraiser in order to influence their opinion of a home's value prior to the appraisal's completion. The act does make exceptions for appraisers to consider additional, appropriate property information, including additional comparables, to prevent or correct report errors.
  
  

FHA Guidelines

• The FHA appraisers guide to home valuation and the appraisal process, Handbook 4150.2, also addresses the issue of communication with FHA appraisers. Because FHA appraisers have a contractual relationship with the lender, and ultimately, a responsibility to HUD, appraisers may discuss the appraisal only with the lender's underwriter. Only the lender may contact the appraiser before the appraisal has been completed. Furthermore, Realtors must only communicate with lenders regarding appraisals, as the lender is considered the sole source of information for appraisal matters.