Federal appraisers accused of ignoring water concerns in Arizona, inflating property values

PHOENIX – A nonprofit conservation group is accusing federal appraisers of ignoring water concerns in southern Arizona, leading to overvalued properties.

The Tucson-based Center for Biological Diversity said it received documents via the Freedom of Information Act showing that U.S. Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA) appraisers are not including environmental water scarcity factors in their reports for homes in Sierra Vista and Fort Huachuca.

Robin Silver, co-founder for the Center for Biological Diversity, told KTAR News 92.3 FM recently that it found 138 inaccurate appraisals.

A question on the appraisal form asks about environmental conditions on the property, but Silver said the appraisers failed to document known water concerns. Licensed appraisers for HUD and FHA are expected to be local experts.

How failure to document water concerns affects property values

Silver claims this has led to overvalued properties.

“If you own property for which the water is going to need to be reduced, then your property becomes worth less, now in real time and into the future,” he explained.

The conservation group has identified over 1,500 mortgages that appear to be defective. With average property values around $300,000, Silver estimates nearly $500 million in defective mortgages in the Sierra Vista-Fort Huachuca area since Aug. 2023.

He fears ignoring environmental water concerns in the area could lead to a housing crash.

“Most of the monitoring, either wells or stream gauges, are already being violated. In other words, the water being used in Sierra Vista is already overallocated,” Silver said.

What can be done about federal appraisers ignoring water concerns?

When the Center for Biological Diversity addressed the issue with federal agencies, they pointed the group to the Arizona Department of Insurance and Financial Institutions.

“They’re refusing to do anything even though they know their appraisers are violating the law. They’re governed by the feds, who delegate to the state. The feds have gone dark,” Silver said.

Something like this would typically be caught by federal watchdogs known as inspectors general, but President Donald Trump fired 17 of them across multiple departments shortly after he returned to the White House in January.

Silver says his group is looking into whether the Administrative Procedures Act could be used to ask a judge to compel the agencies to obey and enforce the laws.

Additionally, the Center for Biological Diversity has asked the Arizona Attorney General’s Office to investigate whether the situation violates the Consumer Fraud Act.

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