Appraisers in four states — Illinois, Maryland, Missouri, and Nevada –- may not be allowed to consider “distressed sales” (e.g., foreclosures or short sales) when using comps as a part of a residential appraisal. If bills being considered pass, it could put appraisers in the position of choosing whether to violate federal law (Uniform Standards of Professional Appraisal Practice, or USPAP) or these new state laws.

According to the Appraisal Institute, which has the full story:

Not following USPAP could subject the appraiser to having action taken against their license. Therefore, appraisers would have to make the decision to commit a USPAP violation — which in the case of federally related transactions would be a violation of state law — or to violate the law prohibiting the consideration of distressed sales as comparables.

Not using distressed sales as comps isn’t an entirely new issue. Based on this thread on the Appraisers Forum, the VA doesn’t allow them to be used when appraising its properties. Writes one participant, discussing a job:

The neighborhood has a mixture of short sales, foreclosures, and normal sales. If I used short sales, the value comes in about $165K. If I used normal sales only, the value is about $210K That’s the difference of whether a buyer wants to deal with the hassles of a short sale. […] Short sales are a marketability issue. Its just like dealing with a property that backs up to a highway.

Appraisers, not surprisingly, aren’t thrilled about these bills.