HVCC (Home Valuation Code of Conduct) or How we misplaced the baby after throwing out the bath water.
HVCC? Home Valuation Code of Conduct….
Really?! Here is one more example of how a well intentioned albeit not well thought out regulation is complicating the transaction by messing with the appraiser. Let me explain….. We now have an additional level of management that draws money away from the already low (in my opinion) cost of an appraisal from the guy/gal doing the work. There are two major flaws. One, the appraiser no longer has that relationship with the loan officers or lenders that he/she worked so hard to establish. Two, the management company or as I like to call it, the parasite, now retains all the appraisal leads and a portion of the appraisers income in an effort to shield the appraiser from the abuse he/she received from the lenders or real estate agents…….
ABUSE?! You may ask, what abuse? It seems that while the Banks were becoming filthy rich with the stated income loans that the appraisers were pressured to find the stated value of the home. No!! you say. Yeah it’s true. Bad, Bad appraiser for being so easily swayed and Bad, Bad bank for so fiercely swaying and Bad, Bad lender for so fiercely swaying and Bad, Bad Realtor for going along with the whole thing. Oh, and don’t forget the buyers and sellers played a part in this as well. After all, doesn’t market value start with the seller and the buyer?
So, now let’s look at what is happening during a typical transaction. The buyer goes out for months with the Realtor and writes offer after offer after offer and finally after months of this, is successful in nailing the perfect home down. Escrow is opened and a fully executed contract is delivered to the lender along with a visit from the buyer to the lender to sign applications and give the lender a check for the appraisal. At this time an order is input into the system and if all parties are lucky the request gets assigned to a seasoned appraiser who knows the area and will actually look at the comparable properties and use data that closely resembles the subject property and the appraisal will come in at value without a problem. How’s that for a long sentence? So you may think. What can then happen is someone in their infinite wisdom (usually the person who decides they really don’t want to do the loan) asks that the appraisal be reviewed because they are skeptical of the value? Or what is usual, the amateur appraiser gets the assignment and goes out, looks at the subject property, goes back to the office and pulls up property in the area and prints off the first 3 sales, pendings and actives. Oh, did I mention that most information in the MLS starts at the lowest price first? He/she then compiles the information and fills out their appraisal and submits it to the lender at a price that does not even closely resemble the sales price. This appraiser (in my opinion) tackles the assignment this way because he/she has to crank out as many appraisals, good or bad, so they can make enough to stay in business. You know, they get paid whether the appraisal comes in at value or not.
This “cannot be” you say. There were mutliple offers on the property and some were for more money than the actual sales price and you sat down with your Realtor before writing the offer and went over numerous comparables that easily warrant the price you offered. How can this be? Can we talk to the appraiser in hopes to find a common ground? NO! Can we talk to the lender so they can talk to the appraiser in hopes of saving the sale? Yes, and they can’t talk to the appraiser…. They can however talk to their manager who can talk to the manager of the appraiser, who may or may not choose to talk to the appraiser, and even if they do very seldom do you now get a more correct appraisal because everyone is now skeptical of YOUR intentions… Bad, Bad Realtor…..
It’s obvious there was a problem and creating the HVCC appears not to be the answer.
So, for a better answer to the problem. Start from the top and work your way down after creating legislation that makes those acts of coercion and harassment illegal and incarcerate those who take part in that behaviour. The greed did not originate at the bottom and trickle up you know. It always flows downhill.
This too shall change as the market changes and for now the home buying experience has become more muddled and difficult for the buyer, the Realtor, the loan officer, and the escrow officer, while the banks (Freddie Mac & Fannie Mae) sits and controls the inventory and the rules of the game from their Ivory Tower.
Kelly…
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6 Responses to “HVCC (Home Valuation Code of Conduct) or How we misplaced the baby after throwing out the bath water.”
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BRAVO!!!!
I know I rambled a bit and my point was a bit hard to follow. Just a little passionate about this amazing screw up called HVCC.
I read it and I didn’t think you rambled at all
and it wasn’t hard to follow and it does show the power of the communal brainwash.
Most Sincerely,
Wayne
Stream of consciousness maybe, but not rambling. There are many issue with HVCC, but there are solutions that allow lenders to comply with out losing their local appraiser relationships and or going to an AMC. Our solution is one of them that will allow lenders to continue to work with their local appraiser at there traditional fee without inserting any middle men into the equations. There are others out there as well. I agree that HVCC has made things way more complicated and added cost with little benefit
David Chiappe
Appraisalfirewall.com
David,
Thank you for the info and I am sure we will all work our way out of this mess. There are a few local lenders that have found good solutions to the problem and unfortunately not everyone who is buying uses the same lender. It seems so far that the biggest problem with HVCC lies with the larger commercial banks, which in my opinion lost touch with the human part of doing business a long time ago. Well other than their ads on TV that is.
1st for those who have been around long enough appraisng use to be a profession prior to licensing. back hen you had to earn your way on a lenders list and all reports were of good quality, or you were taking off the list and out of work. FHA appraisers were selected at random by computer for appraisers located in that location. With licensing all appraisers were approved for all lists unless taken off.
then HVCC the 1st version was somewhat good once the Gov took over fannie mae it didnt take long. first they delayed the date so that the lenders could feed the Senators and congressmans campaign funds to have a 2nd revision which really gives the lenders the hen house with their own AMC’S.
Now 5-7 States are having AMC’S get licensed some fees are as high as $1,000, so figure out how much more the cost of appraisals will be.
I can remember back before the first bank bust, and licensing that most of the $$ in defaults were due to commercial lending, and yes laws were in place to prosecute those that did wrong, few were ever taken to court.
Appraisers are now in a service industry, I dont even consider it a profession any more.