How does the new Home Valuation Code of Conduct (HVCC) recently adopted by Freddie Mac and Fannie Mae affect the appraiser and the consumer? Just as there are many layers to an onion, there are many ways to look at the financial mess this country is in. Some blame the banks, some blame the mortgage brokers, some blame the real estate brokers, and others blame the uneducated consumer. Maybe if the consumer knew what they were signing up for we wouldn’t be in this mess? What it all boils down to is . . .we all have ourselves and our need for bigger and better, to blame.
The new HVCC is a bill that mandates that the mortgage broker no longer has contact with the appraiser. A third party will contact an appraiser and order appraisals for the lending institutions.
Pressure
In past years, I have heard complaints from appraisers that mortgage brokers would tell them to come in with their number they needed to make the deal or they would no longer order appraisals from the appraiser. This put many appraisers in a precarious position. Appraisers are upheld by a code of conduct entitled Uniform Standards of Paraprofessional Appraisal Practice, or USPAP for short. These standards are strict and require that the appraiser be a Disinterested Third Party to the valuation process. When told that they need to come in with a predetermined number for the deal to go through, the appraiser is no longer Objective. Not only that, the pressure of losing business had to be hard for some. Therefore, some appraisers are thrilled with the new mandate. Others are worried about customer service.
Some Potential Problems
With Third Party Appraisal Services ordering appraisals, the banks will not know if the appraiser even understands the particular market they are appraising. For instance, a person who lives in the city probably does not understand a suburban market as well as an appraiser who lives in that particular suburb. I do have a specific territory, and I am not comfortable appraising outside of my it. Is it possible to do so? Yes, it is, but it will take much more time to complete the report to do the proper research to get familiar with the neighborhood.
From a client perspective, having a relationship with the appraiser helps to ensure the reports are completed in a timely fashion. The client also understands what neighborhoods the appraiser works in and knows the quality of reports the appraiser completes. With a third Third Party Appraisal Service none of the previously mentioned concerns will apply. Not only that, Third Party Appraisal Services could demand expedited service from the appraiser or they will not order again from that appraiser. Again adding pressure to complete a report that is not necessarily quality. Without quality the values could and more than likely will be skewed.
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January 10, 2009 at 10:39 pm
I found this Tribune article interesting, especially the part about pricing. In the short-term it’s going to save people some money on an appraisal, but what it will do for quality is yet to be seen…
http://www.chicagotribune.com/classified/realestate/advice/chi-appraisers-harney_chomes_010jan09,0,423190.story?track=rss
January 24, 2009 at 11:33 am
I just read an amazing article on the National Association of Realtors site:
http://narblog1.realtor.org/mvtype/appraisalinsight/2009/01/countrywide_and_landsafe_sued.html?&WT.mc_id=LS012109&CAT=App
This article should be read by everyone in the Real Estate Industry! Again, we all only have ourselves to blame for the financial mess we are in.