Laura, my college buddy, phoned me in last week to describe her horrible experience with an appraiser. Her house was severely over-appraised by a man who may be licensed and experienced but turns out to be completely unfamiliar with the area where my friend’s property is located. Apparently, the list price was not based on accurate comparable sales stats which make it harder for her to sell the house. Laura was complaining why such incompetence was demonstrated and I told her that she must criticize the Home Valuation Code of Conduct instead.
The HVCC is a code of governing appraisals that became effective one year ago. It was agreed upon by Freddie Mac, the Federal Housing Finance Agency (FHFA), and the New York State Attorney General to “enhance the independence and accuracy of the appraisal process, and provide added protections for homebuyers, mortgage investors and the housing market.”
Sure, it has its good intentions to the public but the number of complaints against it is growing by the minute. One factor that earned the ire of real estate professionals is that appraisal management companies (AMC) that employ professional appraisers will incur substantial costs. AMCs are unregulated so they can take a huge cut from the fees paid to the lenders by splitting it in half. As a repercussion, no local appraisers are willing to work with them anymore and out-of-town recruits come to steal the show…often leaving disastrous results.
It’s absolutely impossible to generate honest and credible appraisal if the appraiser does not know anything about the neighborhood. Often, they are forced to come up with bogus numbers just to meet the deadline set by the AMC. Imagine one appraiser who has to travel miles down the road and be pressed with time to come up with a value. It’s no wonder we’re flooded with bogus results. A la mode, inc. CEO Dave Biggers writes, “A lender can pressure a BPO provider to ‘hit the number,’ or run multiple AVMs until a desired result is achieved, without one iota of concern that their actions will come under investigation using the mechanisms available in the HVCC. In other words, it places a massive liability on the use of actual appraisers, whereas alternatives are free of any liability whatsoever. The last independent watchdog on the borrower’s behalf in the real estate transaction - the auditor if you will - will be rendered irrelevant by the HVCC’s handcuffs.”
Let our collective actions create a loud protest against some clauses in the HVCC. Freddie Mac needs to wake up and smell the coffee!
Andy Denton is the COO of www.Realty.com. Realty.com is a real estate search portal, dedicated to connecting home buyers and sellers to trusting real estate services. Follow the Realty.com blog for up to date housing news and trends. And monitor local mortgage rates at RealtyGadget.com.
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