August 4th, 2009
How will the new appraisal rules impact you?
A home buyer decides to purchase a new townhome from A National Builder. The
base price is $200,000 and this buyer wants granite counters, the $30,000 in
add on options. "I'm sorry," the agent tells them, "you can only buy $15,000
in options. Any more options than $15,000 and you have to pay cash for the
A builder turning away a willing customer? Its because its been the builders
recent experience that the $230,000 home will only appraise for $215,000. So
he's left with a customer pleading for him to just throw in the other
$15,000. And if the builder refuses than the customer walks-and he likely
has the same problem with the next buyer.
The new HVCC (Home Valuation Code of Conduct) is sort of like the
governments proposed health plan: revamp the entire system because 10%
either can't get insurance or choose not to. Its correcting a problem that
wasn't that wide spread in the first place. The HVCC applies to all 1-4
family homes that are financed by Fannie Mae and does not impact commercial
The problem the HVCC attempts to fix is pressure for appraisers by lenders
to "hit the number". So an appraisal management company is placed between
the lender and the appraiser. This is a program intended to help appraisers
and homeowners. So what do appraisers think of the HVCC? A recent survey of
2,250 appraisers found this:
*92% say have seen instances where the appraisal fee on the Closing
Statement is higher than what the appraiser was paid.
*50% say the selection of the particular appraiser by the management company
is always based on the lowest fee.
*85% say the fees offered by the management company are Always or Often
*63% say it least sometimes the low fees affect the quality of their work.
*96% of appraisers have experienced pressure on turn around times and 75% of
say this time pressure affects the quality of their work at least sometimes.
Remember, the HVCC was intended to HELP appraisers - yet 92% of those
appraisers surveyed are unhappy with the HVCC. It seems the only ones
benefiting from these new rules are the Appraisal Management Companies.
A bill that would impose an 18-month moratorium on the HVCC (H.R. 3044) was
forwarded to the U.S. House of Representatives in June. So contact your
congressperson if the HVCC is hurting your business.