HVCC Procedures and Misinformed Appraisers Delay Closings

December 10, 2009


HVCC Policies Undermine Home Buyers

duplex-down-sqI have written many articles pertaining to Home Valuation Code of Conduct. Since I am a certified appraiser, I have had a lot of experience with the program. I have seen both a good side and a bad side to the program and have been lobbying for change. Well, today I saw first hand the debacle HVCC has created in the Real Estate world.

Appraisal Companies Not in Tune with Local Market

My business partner and I have ready, willing and ABLE buyers. They have been pre-approved and have searched all over the Chicago land area to find their perfect “First” home. They finally narrowed their decision and decided to purchase a duplex-down on the north side of Chicago. Everything within the transaction went smoothly until . . . the appraisal was ordered. The appraiser, hired by an appraisal management company, lives in an outlying suburb.

The appraiser inspected the unit and went home to do the proper research required of an appraiser ? or so we thought. Unfortunately, the mortgage broker did not scrutinize the appraisal other than what the bottom line was on the report. The broker then sent the report to the underwriters. During the underwriting process, it was discovered that the unit was appraised as a one-bedroom unit with a basement. Therefore, no insurance company would issue Private Mortgage Insurance to the buyers because of a functional issue with the unit. In the city of Chicago, you typically find that duplex-down units have the master suite on the upper level and two bedrooms and a family room located on the bottom floor. The lower level often is submerged at a hip or chest level. These units have three bedrooms.

Lack of Knowledge Leads to Delays in Closing

The appraiser’s lack of market knowledge in the City of Chicago not only delayed the closing for over a month but he also made the appraisal profession look bad. An appraiser can accurately appraise in areas not within their territory so long as they conduct the proper research. But appraisers also have to balance the time-consuming task of conducting research and making every minute count ? especially when an appraiser is being underpaid. If the appraiser truly had market knowledge on this sale, another unit may have closed and further contributed to the economy. I wonder how many more procedural issues have derailed our efforts in stimulating the economy.

We would like to thank Michael_Lehet for sharing today?s photo via the Creative Commons License.
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About Katie Anderson

Katie Anderson is a respected and successful broker at Sudler Sotheby's Realty as well as a certified appraiser. She specializes in representing clients who purchase and sell condominiums, town homes, single-family homes and income property in the Chicago land area. In her small amount time in the real estate game (she became an agent in 2003) she has assisted in excess of 400 deals and over $200 million in sales and continues to use her skills as a certified appraiser. Katie resides in Chicago's Bucktown neighborhood with her loving husband and 4-year-old-daughter, where she spends much of her spare time with her family and friends. You can contact her at katie@thechicago77.com or at andersonbraack.com

View all posts by Katie Anderson

6 Responses to “HVCC Procedures and Misinformed Appraisers Delay Closings”

  1. SMITH Says:

    Are you saying that the appraiser should have included the below grade area in the GLA?. Per Fannie Mae Guidelines below grade area can not be included in the GLA.If this is a multi-famity, then you are correct,and he should have included it as part of the GBA.

  2. Ben Goheen Says:

    Smith: If you read the article, she mentions that the buyer put an offer on a duplex. So obviously GBA would be appropriate in the appraisal.

    Katie: Good to see another Realtor/Appraiser blogging. And you’re a USD alum too? Go Coyotes! 🙂

  3. Katie Anderson Says:

    I should have been more clear in my post. After the great Chicago fire some of the city streets are at a higher grade than buildings. Therefore, the building is built at grade with 75% of the building at grade level. The front of the building is a bit lower than the street due to the elevation of the street. Also, Duplex-Down units are two story condos located in three to ten unit buildings. They are called duplex-down because they have two levels. Same with a duplex-up. They are considered Penthouse condos with two levels of living space.

    This is where living in the area and working a specific territory is key. If an appraiser came into the area and did not know how these units are build and sold, they end up appraising them as a one-bedroom with a basement.

    Ben – Thank you and Go Yotes!!!

  4. Randy Whiting Says:

    Katie –

    I agree completely. I have a perfect case study going on right now with a client of mine who’s closing continues to be delayed because an appraisal company’s lack of local knowledge. A local FHA appraiser put the house right on point with the loan amount, but when we switched to a conventional loan the UW used company out of California who didn’t know the difference between a town home and a condo and the appraisal came back 25k under valued. After a week for the rebuttal (which was denied) we now have to go with a different UW and cross our fingers. Mean while my buyer’s are stuck between a rock and hard place as they need to be out of their other home. I agree with regulation for appraisers and the desire to avoid banks from using “preferred” companies, but the fact that they are forced to go with companies that have no concept of the diverse landscape of Chicago is beyond me. It seems as if the people making the rules need to lift their head up out of the sand and start talking to those who are affected most. Buyer’s, sellers and their representatives.


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