Real Estate Appraisal Process
With the implementation May 1, 2009 of the Home Valuation Code of Conduct (HVCC) regulations, loan officers and realtors are no longer allowed to select or influence the selection of appraisers.
This program cuts off lender's communication with the appraiser. One would expect this to be a good change for buyers, but the reality is that the extra layer of bureaucracy increases cost, slows down the loan process, decreases customer service and creates an increased potential for mis-communication.
Some of the affects of HVCC:
This program cuts off lender's communication with the appraiser. One would expect this to be a good change for buyers, but the reality is that the extra layer of bureaucracy increases cost, slows down the loan process, decreases customer service and creates an increased potential for mis-communication.
Some of the affects of HVCC:
- Appraisals are now more expensive for the consumer, because the third party company charges a fee to process the order.
- HVCC is likely to create unnecessary customer service issues. This makes addressing appraisal issues as they arise more difficult and, the client becomes irritated and frustrated.
- Going through a third party Appraisal Management Companies (AMCs) is inefficient. These unregulated entities (AMCs) don’t acknowledge orders consistently, they charge additional fees and the turn-around times are slow.
- Lenders are forced to utilize large national companies who order the appraisal. Each AMC has a roster of appraisers at their disposal. There is no guarantee that the appraisers working for the AMC will be skilled or knowledgeable about the local market.
- Payment methods vary between AMCs.
- Independent appraisers can no longer rely on the business of satisfied mortgage professionals and realtors. They will be forced to work with the AMCs or go out of business. Appraisers are being asked to work for less, though the AMCs are charging borrowers more.
- Many loan officers have had to get two separate appraisals over the last month. On every appraisal, the appraiser must check one of three boxes regarding local market conditions. The options are: “market is appreciating,” “market remains stable” or “market is declining.” Given the nationwide decline in home values, appraisers are most likely to cite “market is declining.” This may prompt the underwriter to request a second appraisal.
- FHA has not adopted the HVCC. It is not requiring lenders to use the AMCs. However, many FHA lenders are using AMCs anyway, charging even more for the service than Fannie Mae and Freddie Mac.
- Loan officers are having to tell realtors and buyers that: they don’t know who the appraiser will be, they can’t use anyone buyer recommends, they don’t know when it will be done and they hope it doesn’t detrimentally impact the closing.
