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…
Getting the Short Sale approved (two loans) can be a win-win-win-win-win. That’s win x 5
Well, it’s getting more and more complicated and in order for a short sale with two loans to happen, the second lien holder has to drop the lien and if they don’t, there’s no sale. Unfortunately for the seller, and the REALTOR, both of the lenders (lien holders) have some control. I just want to point out that even though everyone feels like they’re losing, given today’s set of circumstances and the reality of the real estate market, everyone is winning. Well, kind of. Hear me out. The first lien almost always realizes more, and some would argue much more, out of the Short Sale as opposed to a foreclosure. The reasons are simple. No expensive legal battles (the foreclosure process). No holding costs once they own the property (maintenance, taxes, utilities, etc). No repairs to get the property in-shape to market it for sale. No vandalism or liablity on a vacant property. No “cash-for-keys” or lengthy eviction process. Depending on their equity position and where the property is located, it has been estimated that the first lien holder may net an additional $100,000.00 by utilizing the Short Sale process as opposed to going through a foreclosure. Sounds like a “win” to me. Now, for the second lien holder, if they cooperate, even on a very basic level, they will net something. Under the current set of “circumstances” they almost never have any equity positon left. Which means that if the first lender forecloses, the get zero dollars. So, what we’re seeing in daily practice, is that the first lienholder usually allows the second lienholder to net somewhere in the neighborhood of $3,000 to $5,000. to get them to cooperate and remove their lien when the property closes escrow. Sounds like a “win” to me. You do have to be careful here as some second lien holders are now trying to negotiate “outside” deals with the homeowners to net more to them but it’s illegal unless you have full approval of the first lienholder. You can always ask Mike & I for more information on this point. Now for the seller. You may get to negotiate with both lien holders so that when they report the “payoffs” to the credit reporting agencies, they report it in such a way that won’t“ be as damaging to your credit report and subsequently, your FICO score. Sounds like a “win” to me. You can also ask Mike and I for further information on that. And for the REALTOR, it may not feel like a “win” because it’s 2 to 3 times the amount of work, and you’re at the mercy of third parties that have no real interest in the transaction. But you should eventually get a commission. Sounds like a “win” to me. And for the buyer. You only have to negotiate with the “real” owner/seller (subject to the lienholders approval) and generally not compete with multiple offers bidding the property way up over asking price because the property is usually listed closer to market value. Sounds like another win. Even with all of these “wins” for everyone involved, the process can be frustrating and lengthy. But it always starts with the first step. Go for it !!!!!
wallace…
Playground for the old kids
I have an idea…. Let’s start building these parks in U.S. cities all across our great country.
Kelly…
Think banks are losing money on that Short Sale?
Wow, that is about all I can say for now… It will take me a few minutes for me to pull my jaw up off the floor after I watched this short little video. Thank you Nick for sharing this with all your Facebook friends. Please take about 2 minutes and watch this video and then share with everyone you know. Don’t stop there though call your representative, congressman/woman and anyone else you think needs to see and hear and politely ask for an explanation and a stop.
I think everyone should profit in business and this is ridiculous.
Kelly…
Are we eating ourselves out of house and home?
What a great article I ran across at www.active.com and I can’t think of any better time to post it than now, right after the Super Bowl Party, well except for maybe just before the Super Bowl party. Too many of us wind up at these parties and graze all day long at the table while enjoying a 
few dozen beers with friends and never really think about the consequences or even begin to consider some portion control. OK, there are those lucky few ( I call them Ba@*ards) that are still slim or svelte or just damned good looking and they ate half the table. Well sadly, they look great on the outside but what about the inside?
Anyway, take a moment and check out the links above so maybe next time we refrain just a bit.
Kelly…
