Sunday, February 8, 2009

Home Valuation Code of Conduct coming soon to a Sacramento appraisal near you...

Last week I had an experience with an appraisal gone awry. The appraisal value was deemed substantially lower than the contract price for my listing, which obviously threw a wrench into an otherwise smooth transaction. Luckily, I was able to obtain a copy of the appraisal. I found a few errors in the appraisal, made my case, and thankfully it was revised. Phew! Problem solved...for now...

Starting in May, real estate agents and lenders will not be allowed to have any contact with appraisers. Lenders will be ordering their appraisals from large "Appraisal Management Companies" (as opposed to directly from the appraiser himself) that take a cut of the appraisal fee off the top, and farm appraisal orders in mass to registered appraisers. Follow the link to read the new rules imposed by the HVCC (Home Valuation Code of Conduct).

While I do understand the rationale behind this new law, I think it creates a whole new set of problems.
  • Instead, appraisal issues like the one I experienced last week will not be resolved. Agents will not receive a copy of the appraisal, nor will agents be allowed to contact the appraiser.
  • Appraisers will be forced to try to do the same work for less compensation. An appraisal fee is usually anywhere between $350 - $450...with the management companies taking a bite out of that fee, appraisers will be expected to turn out the same quality of work for less money...either that, or I imagine the cost will be passed along to the consumer, making appraisals more expensive. Which do you think is more likely to happen?
  • Out-of-town appraisers will be determining values for areas in which they are not familiar. The management companies will be dispatching appraisers from all over northern California to do Sacramento appraisals. Gee - Land Park vs Oak Park...Arden Park vs Arden Manor - they are close enough together, so they must be comparable, right?

Wouldn't a better solution be to crack down on the shady appraisers, lenders, and agents?

1 comment:

Anonymous said...

You are correct, Erin. As a Registered Certified Appraiser, I find that instead of making my typical fee of $350 for an appraisal which takes mefrom 8-12 hours to complete, if I work for these AMCs, my fee will be about $150 for the same work, with the same overhead expenses for E&O, Databases, licensing & CE, appraisal software lease, MLS, auto expense, high speed internet, paper, ink, cell phone, etc. So my net hourly wage comes down to about $6.38! I could make more $$ with less liability working at the fast-food counter. So do I cut corners to do those appraisals faster for a higher hourly income? or reluctantly close the door and turn out the lights? Meanwhile, Borrowers think they are getting a $400 appraisal, but they're actually getting a $150 quality appraisal; they're just paying $400 for it! These AMCs not only are skimming off all the appraiser's net profit, but because the big ones are owned by the lenders, our fee just becomes an additional profit center for those lenders. In addition, our training and USPAP requires us to be independent and not an advocate for any one point of view in the transaction...the gatekeeper of value, one might say. Well, if the lender requires their own AMC to use their own panel of appraisers (and with these lenders, the Borrower has NO CHOICE), then who is the gatekeeper of value, and who is protecting the Buyer's ability to get an honest opinion of Fair Market Value? If we tick off the AMC owned by the Lender, do you think we'll ever get any work anymore? HA! The way this is going, either we must work for the AMCs at poverty wages, or we won't get work at all! Sounds like extortion! This is an absolute travesty and people need to understand how their rights and freedoms are being jeopardized. Just as a side note, this already-in-effect-by-practice HVCC with its push to have AMCs highjack virtually all the appraisal business, has already financially destroyed thousands of honest and ethical appraisers. Here's a Stimulus Package Idea: By rescinding the HVCC and banning AMCs, the gov't could employ/re-employ 50,000 desperate and financially strapped appraisers...TODAY! Wouldn't cost taxpayers a would just take the profit from the non-producing middleman, would ensure that appraisers are independent and not bound to 'please' the lender's AMC, and would enable appraisers to take the time necessary to carefully come to a true opinion of FMV. BTW, Borrowers are already seeing $50-$75 higher appraisal fees on the HUD-1 due to the AMC greed. Not only are they skimming 50-75% off the appraiser's normal fee, they are adding a padding onto the top which Borrowers get stuck with. So typically, the appraiser does all the work for $150, and the AMC gets $325 for virtually NOTHING! And with the big banks getting gobbled up by bigger banks, we are looking into the yawning black hole of bank monopolies. That does not bode well for Borrowers because Banks are greedy, stupid and incompetent (note: mortgage meltdown, Wall Street disaster, $700Billion TARP misappropriation). Would you gamble that these guys are going to make a better situation for your Buyers?! I don't think so. BTW, One thing you CAN do, is use FHA & VA financing, and avoid going through the big banks like B of A or Wells who have their own AMCs. The HVCC does NOT apply to FHA/VA. Use a mortgage broker; he/she can order the appraisal direct to any appraiser on the FHA or VA roster. That will give you some control in your transaction, will most CERTAINLY help the appraiser, and will bring more money into your local community...because we appraisers LIKE to spend money in restaurants, stores, repair shops, dentists etc in our local communities. Unfortunately, most of us are destitute at the moment due to early implementation of the HVCC, and Big Banks' wholly-owned AMCs.