How 37% Of All Home Sales Have Been Lost

The National Association of Realtors recently surveyed their members about the effects of the Home Valuation Code of Conduct or HVCC on their business in the first two months of this new rule. The HVCC eliminates the ability of the mortgage professional from ordering your appraisal with a professional appraiser that he or she knows and trusts to do good work.

This new rule came about after NY Attorney General Andrew Cuomo sued WAMA and its Appraisal Management Company or AMC that it owned for negligent and inflated appraisals in the state of New York. Mr. Cuomo then went after Fannie Mae and Freddie Mac too for not protecting borrowers and the public from this problem. Let's be clear about the problem, the problem was inflated appraisals created by the Appraisal Management Company or AMC that WAMU owned.

Mr. Cuomo's solution to this problem is to require every bank and mortgage lender in the country to form a AMC of their own or create a separate department within their firm to handle the appraisal process.
Mr. Cuomo did what ONLY a politician could do--solve a problem wherein the solution to the problem is the very thing that caused the problem! See the irony? The problem was the AMC which was owned by the bank, now every bank and lender is required to use an AMC which may be owned by them. This is like telling a drunk we are going to get you to quit drinking, by having you drink MORE. It's a stupid idea that only a politician could fathom. To make matters worse the AMCs are NOT regulated either whereas the bank or lender is.

After this background information on the HVCC, here are the results of the NAR Survey--

      * 37% of their members have already lost a sale due to an appraisal that came in below sales price.    This was just in 2 months!

     * A majority of Realtors reported that the appraisers were out of the area and not familiar with the neighborhood.

     * The appraisers did not use true comparables for their sales data because they were not familiar with the area; thus the appraisals came in low.

You may be thinking "big deal". Here's why it is a big deal--each of those Realtors represent a buyer or a seller in the sale of a home. 37% of all homes where the buyer chose a conventional loan, the deal fell apart and did not close. Dreams shattered! Moves cancelled! Families split apart! This is shocking news!

So, how do you keep it from happening to you? I will write about that tomorrow along with a story of what now passes for an appraisal with the big banks and their AMCs. You won't want to miss my next post.