Mar 24, 2010

Appraisal Problems (Again)

Hello Neighbors,

More insanity with appraisals.

As we are seeing with just about every appraisal these days, the values are out of sync with the market. It doesn't matter if the appraisal is for one of our real estate clients or for one of our partner company's loan / re-fi clients.

On May 1st of last year, the government changed the regulations governing the appraisal industry. The regulation is known as “HVCC” – Home Valuation Code of Conduct. We are now getting appraisers from out of the area doing appraisals in areas

Here is a bit of background on the appraisal changes over the last year and a half:

My own experiences:

Thoughts from the industry in general:

From the National Association of Mortgage Brokers:

Our latest appraisal came in at roughly $11,000 below our offer price.

The appraiser isn't a high performer. He has used one comp that is bank owned property (that isn’t truly “like kind”).

What does it all mean?

If you are putting a large sum of cash into the process, then the appraisal value isn't as much of a problem. If you are using a high loan to value ratio, then you may be in trouble - having to renegotiate the contract, get additional appraisals, or a few other steps.

Remember - the valuation is more of a “comfort” level for the Buyer / Borrower. The appraisal isn’t used by any other entity – it’s not used by the County to determine your taxes, it’s not used by the home owners insurance company to determine value, it’s not used by any other group in this process.

I think my clients are getting this particular home at a good price (or I wouldn’t let us proceed).


Nope. We still don't have effective channels to provide feedback on appraisals or appraisers.

- Jim

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