Recently, I wrote about my experience with the “new and improved” real estate appraisal process, the HVCC, House Valuation Code of Conduct, a misguided attempt to right the wrongs of past appraisals. The appraisal process needed to be revamped, but I’m not alone in seeing how difficult the new appraisal system has been for the consumer. Petitions are online for people to ask that the HVCC be reevaluated.
Briefly, the HVCC requires all appraisals to go through a central clearing house. The next appraiser on the list is assigned the job, regardless of experience and knowledge about an area. The appraiser may live and work in an area hours away from the property. It’s very hard for anyone to know the individual nuances of a neighborhood, builders, school systems, etc. and how these affect value. I can only imagine how hard it must be for appraisers to have to evaluate properties hither and yon. How could anyone appraise properties in an area that’s the size of small states and get it right all of the time?
In addition, appraisals cost buyers about the same as before, $450-500, but the portion of the fee directed to the appraiser has decreased. The appraisers only make about $200 and the rest of the fee goes to the appraisal management companies, which, by the way, are often owned by banks and title insurance companies. This from Matt Carter at Inman News:
As originally proposed, the code would have barred lenders from ordering reports from appraisal management companies they owned more than a 20 percent stake in. But as adopted, the code does not limit lender ownership stakes in appraisal management companies.
What if your lender makes a mistake and your loan needs to go to a different lender? Believe me, it happens and it happens to good, strong buyers. Well, not only will your loan close late, you”ll be the proud owner of two appraisals. This from Matt Carter at Inman News again ( Joseph Heller would have had fun with this one):
The code allows lenders to accept an appraisal produced for another lender, for example, but only after the receiving lender obtains confirmation in writing from the original lender that the appraisal is in compliance with the code.
Because there is currently no industry or supervisory standard regarding what constitutes an adequate written confirmation of compliance with the code, Kittle said, lenders are reluctant to accept another lender’s appraisal because they might be forced to repurchase loans if they are found to have breached the code.
That means lenders “typically order a new appraisal at the expense of the borrower,” even if an appraisal has recently been performed by another lender, Kittle said.
I’ve heard of appraisals coming in late, causing the buyer to close late and lose their loan lock. Imagine how difficult this is when you have movers sitting in your driveway and they are booked for weeks afterward. I could go on, but this is a simplified version of the changes brought to the real estate industry by the HVCC.
Two US Representatives, Representative Travis Childers (D-Miss) and Gary Miller (R-CA), have introduced a bill, HR 3044, to suspend the new HVCC code for 18 months, so it can be properly evaluated. This a good thing for consumers and the housing industry. Changes to the appraisal system need to be done right, but not by implementing a system that creates more problems. We must be fair to both buyers and sellers and make sure appraisals are coming in on time and at the value that exists in the marketplace.
It’s important for you to contact your congress person to see this law is passed to help protect the integrity of the system and ensure changes to the appraisal system are a benefit, not a detriment.
Eastside Real Estate Buzz
