I was going to make this a one line post and say that this law STINKS and leave it at that. But in fairness to the consumers, realtors, lenders and everyone else out in the lending sphere, the law review needs some elaboration.
HVCC was created to take the originating task force out of the way of influencing appraisal values. The real truth is that it rarely happened. I'd say that less than 3% of the lenders were unscrupulous, but as the expression goes the whole suffers because of the sins of the few. Needless to say, those that are suffering are not only lenders, but realtors and, most importantly, CONSUMERS.
We now order our appraisals through a corporate round robin or worse, through a national appraisal ordering firm. The power has shifted that instead of having a lender protect the consumer and push the process along to meet the goals and deadlines set in the legal contracts, the prcess is left as if every party is putting their heads in a blender.
We now can't say that we want to use an integrous appraiser. In the inverse, appraisers that have been blackballed because of unscrupulous or shady practices are now in the mix providing their services to lenders who have blacklisted them.
I'm seeing appraisal contingency deadlines being blown because appraisers are now taking 2 - 3 weeks for an appraisal. Appraisers aren't even acknowledging that they got the appraisal order. In the meantime, great appraisers are waiting for appraisal orders because their name hasn't come up in the round robin format.
WHAT ABOUT REFINANCES????
As a consumer, wouldn't you like to get an estimate on the value of your home or a ballpark before you write a lender a check? We used to say, Mr. Smith thinks his home is worth $300,000. He wants to refinance. Is that likely or is he on crack? Now, pay the lender so that we can pay the appraiser and they don't care anymore. It's like a government job. Once you're in, you're in! So sad.
There's really nothing good about the law, except to give poor appraisers an opportunity to correct the sins of their past or slide under the radar and get on some lender's round robin format. Am I Clicking with you Here?
HOPE STILL EXISTS! HERE'S WHAT YOU CAN DO:
1) If you're writing a contract as a realtor, build in an extra week or two for the mortgage approval. We're getting them done, but the the HVCC is wrecking havoc within the insudstry;
2) See if your lender orders appraisals from a national firm or do the do a round robin from their corporate office. I'll tell you hands down, the more control that a lender has on an appraisal delivery, the greater the likelihood that you'll hit your date easily.
3) Be in constant communication with your lender. While your lender can't interface with the appraiser, their corporate offices can.
4) THIS IS MY FAVORITE....CONSIDER FHA!!!! FOR NOW....FHA does not have these restrictions. I'm told by very high up sources that it's inevitable that this same law will eventually apply to all loans. As of now...it doesn't. I'm now excited when I can do an FHA loan for someone because I invariably am assuring the client of a greater service because I have greater control for the consumer.
In conclusion.....IT'S HERE! Be aware, be advised and proceed with caution.
If you choose, you can find me here:
NMLS ID#158606 
An Illinois Residential Mortgage Licensee
Thanks for your post. Very good reason to use FHA when possible.
Follow me on Twitter: http://twitter.com/roykelley
This is great information!!!!!! Thank you so much for sharing this with us.
Larry: Thank you. We were recently instructed to do 55 day locks for all our loans. Part of this is the increased appraisal time. I have a client where I locked his loan 2 weeks ago. Still no appraisal. The only thing that saves me is I'm older and can play the patience game. Otherwise, I'd be tearing my hair out! We also order FHA randomly just to comply. Plus, my company has always been forward thinking. I believe you're right in that FHA appraisals will soon be subject to HVCC as well. None of us likes the lack of control we now how but, as they say, this too shall pass. Take care.
Larry,
When laws cause real estate service providers such as lenders and title companies to lose control, the process becomes strained...!!! Thanks, Fran
It was funny - I had a client looking to refi the other day and order an appraisal, but I couldn't do it for them. Instead I had to ask m processor to ask corporate IF IT WAS EVEN OK to order without an application. What a weird predicament we have been put in. One that will do more harm than good in the end I truly believe. I think the majority of the bad apples have already been purged from the business. Now we pay for others sins. Others that are off working a 9-5 somewhere.
This is certainly an eye opener. Luckily, for now, I'm working mostly with FHA buyers.
One bad appraiser = 100 bad loans
One bad management company = 10,000 bad loans
Larry, our local lenders have already told us to add an extra two weeks, it is just not possible to get them all done in 30 days right now, with all the refinacing.Good information.
Larry
Not only are appraisals going to take more time to receive them but maybe other problems will emerge. I got a nasty surprise today. The appraisal came $ 20,000 under the selling price. I am representing the Buyer and the home that I sold has $ 50,000 in improvements but no value was added for these improvements in the appraisal. In the section where it mentions "condition" of the property, all the comps (than don't compare) were written "similar". I sent the appraisal to two appraisers that I know and both concurred that the $ 20,000 difference could have been very easily substantiated by adjusting values since all the comparables were inferior to the property that I sold.
Isaac Bensussen
Larry,
Having to allow more time for the appraisal process might not create a problem for buyers who are offering on a house that does not have another offer on it. However, here in Ventura County, CA we are experiencing multiple offer situations and one of the strategies I have always used for my clients is to tighten up the timeframes which sellers are always in favor of. This new law destroys the ability to create a competitive offer using strategies other than price. Great article.
Hi Larry -- Your post illustrates so well why laws are so hard to write. It's like killing an ant with a 50 lb. sledgehammer and the fallout is greater than the problem it solves sometimes.
I will be filing my first ever complaint against an appraiser VERY soon. Likely next week, as soon as my clients deal is closed and I know they will not be hurt by my actions. This plan in place is NOT going to work. They tried to fix something that wasn't really broken. Like any industry that has fraud *and heaven knows so many of them do* they should have gone after the bad guys and not done something that is the biggest cluster bang I've seen in years.
It is affecting not only deadlines but VALUES. Two appraisals this week --L-O-W- One of 10k the other off $35,000!!!!!! 9 years I have never had this happen.... lender policy says they can not order another appraisal that we either except the value or do a dispute (through the 3rd party appraisal mgnmnt) and who knows how long EXTRA this is going to take?? And why is it when an appraiser has a hard time looking for comps they call US? Very frustrating and it is all just the beginning of what is becoming an appraisal nightmare.
This whole change seems to have added more complexity, more time and less accountability to the whole mix.
Hi there,
By now, most of us have allowed more time for the appraisal contingency. Yet that's obviously not the only issue, it just the waiting in limbo that adds more frustration for consumers, they feel powerless.
Once again, a knee jerk reaction to a minor problem.
Our Guv at work.....
Great article, Larry... I agree with all of your thoughts. This new law is truly hurting our valued clients.
Larry,
Congrats on the Star!!!
Good article and well written...
Your building consultant for life in Nashville, TN
Just another reason to cut the government out of the picture and start doing more owner financing. Maybe the government will figure out that they need to stay out of a business they don't understand if we voice our opinion by just cutting them out of the picture.
Larry - You wrote, "We used to say, Mr. Smith thinks his home is worth $300,000. He wants to refinance. Is that likely or is he on crack?"
This is known as "comp-checking" which has always been against USPAP - Uniform Standards of Appraisal Practices. All appraisers are supposed to adhere to USPAP.
That being said, no one is happy about these rules, including appraisers. Borrowers are paying much more for their appraisals, and that extra money is NOT going to the appraisers.
I am having that problem now with a deal..the appraisal is not in..and it's 4 weeks later..
Larry, It's getting harder and harder to close a real estate transaction. I keep moving forward but man o man it's hard to get up and go to work. Between dealing with REOs , short sales and now appraisal issues this job is very tiring.
Great post.
Appraisers and bankers I have talked to just told me expect higher fees and longer wait times for an appraisal and possible a delay in closings....
Bettina
There are lots of good reasons to use FHA but this is a big one, although it doesn't protect you from incompetence in an appraiser, at least we can work to get corrections done unlike HVCC. When I have a conventional loan buyer, I counsel the listing realtor to bring comps and meet the appraiser. We have had appraisers that are not subscribers to our OKC MLS system.
THanks for all of your comments.
Don...asking an appraiser if the value is in the ballpark isn't out of line. Asking if he can get a value is. I don't agree with you here.
This is a great post. It shows that the same results (delays) are happening because of this new requirement everywhere.
I am actually not having problems with getting appraisals on time. I thought I would, but no.....
Interestingly enough, my appraisals are coming in higher, not lower. What is that about?
The biggest beef I have with HVCC is this: Appraisal is attached to the lender, not to the borrower.
If you have an unusual property or buyer, I used to shop the deal to my various lenders until one of them agreed to take the loan. Now....you simply jump off the cliff and hope that the lender will accept the property.
I would say the biggest issue that I'm having right now is cost. When the cost for appraisals go up $100 that doesn't help the consumer at all.
Frank...well said.
Janet....I have the same beef. They don't care anymore. Just jump off the cliff and see.
Darrell....I know...the goverment has created a racket!
This is really crazy. Whose idea was this law? Its just one more thing to make the home buying process difficult.
I am going berzerk because these things are all late. I use a direct lender and they use these for all loan types including FHA. You may have to pay a little more for the appraisal but fees and rate are lower than brokers I have shopped here.
There is zero accountability with these rules and it is time for reconsideration, even after only a month. It clearly doesn't work.
Yes, I agree. HVCC stinks and I may be repetetive but this new law basically has giving the appraisal management companies a license to steal. I've personally seen two home values come in an unacceptable amount lower than what was expected and it seems wrong that the appriaser took the payment and provided an appraisel that was useless. There was a time that you'd either get a call from the appriaser at the time of the order letting you know the expected value was way off or the appriaser might recognize that when he got to the porerty that there were problems and he or she would get a few dollars for their time and that was it. What happens now is just cold.
I agree- the new law STINKS!
But it's exactly what always happens when the government sticks its nose into private business! They may intend to help alleviate existing problems, but they always create ten new problems for every one they solve.
We sent all these idiots to Washington, and keep clamoring for them to "fix" every problem in our lives for us, though, so we've got ourselves to blame, no?
Larry - great run down of the current situation. I'm already starting to add an extra week or two to my closing deadline so that my buyers aren't in jeopardy. We should start seeing more of that in my opinion.
This law stinks!!!! I know in my area this is horrible. We get appraisers that come up our hill that have no idea about a resort commnunity and we DO NOT have tract homes, every house is unique... bah humbug
Does that exception also exist for VA loans? just curious. I'm glad to know that FHA lenders aren't stuck with this monstrosity.
Yes, we just had an appraiser come the office and I blogged on this (not as eloquently as yours, I might add) and the poor man was so distraught that the years of relationship building he had developed is now down the drain. some young blood with no experience can now be called to do the same job.
What does HVCC stand for?
I don't think it's right that the consumer has to pay for a middle man, sometimes as much as the actual appraisal cost. Also you are right about the time. THe last one took forever to get back.
On April 30th we ordered an appraisal hoping that it would get in before the deadline, well we were wrong it got ordered on the first, there goes the time line. It took us 21 days to get an appraisal that was $27,000 lower than we expected. I have had a post written very similar to your for over 3 weeks now and haven't posted it because I want this thing to close first. Documents arrived this morning and the underwriter called and changed her mind on one of the conditions we had met and told the escrow officer to rip up the documents. Now we have to get gift funds to close. It should have been a slam dunk deal, but the government decided to "HELP"
For those of us that dealt with regulation change in the S&L crises in the 80's, we are quite confident that the system will work itself out in the coming months. Unfortunately we will have to take it on the chin during the transition. I am with you......having had an appraisal thrown out the window and being reduced by 13% by a nameless national evaluation review company. Now we have a seller that is marked by the system. i.e. Their FAIR market is now 13% below what a buyer would normally agree upon. So we say crap and move on. I promise you it will evolve, as capitalism will over power too much government control.
Larry, I was wondering how long it would take to run into a problem with this new law and it only took one contract. The appraiser was from a neighboring county (which isn't too unusual) but the house was very rural, comps were hard to find so luckly for us he just gave it contract value. The problem came in when he wouldn't walk to the street and turn on the water since the house is vacant and the sellers didn't want any "accidents". His opinion was appraisers don't turn the water on, when I asked him why he didn't call me the response was he viewed the house very early before business hours, my response was I would rather answer the phone than pay the 125.00 for the plumber to check the water/pipes and hold it up another 2.5 days. No one wants to work harder than they have to but does anyone else understand why the seller kept the water shut off on a vacant property?
I'm stepping off my box - Thanx
Estimated homeowners value. 205k. Amc apprasal that came in today...145k value... Good news here, had a ton of equity to work with so this hit really doesn't hurt the math of the file but in the past a call would have come in advising that in this case, the expected value was about 30% off...
Jason
www.hvccpetition.com
1 bad appraiser = 100 bad reports
1 bad AMC = 10,000 bad reports
Bank ownership of AMCs is a crime against the public.