In the mortgage mess we are still working out of, there is plenty of blame to go around - including to appraisers who overvalued Las Vegas property to support their friends in the mortgage industry.  To make the process more impartial and remove pressure on appraisers to aim for a specific value, new regulations went into effect on May 1, 2009 to distance all the parties in a loan transaction.

As a result of lawsuit in New York brought by the Attorney General against the appraisal division of First America Corp. which supposed inflated 260,000 Washington Mutual loans, a set of regulations known the as Home Valuation Code of Contact was implemented May 1, 2009.  The law forbids any communication between appraisers and anyone who would derive income form closing the sale.

Though this sounds like a good fraud-busting  approach, the law has had many annoying and perhaps unintentional consequences that can delay closings and increase cost for customers. 

Not all the communication of the past between loan officers and appraisers promoted fraud.  Loan officers tended to use appraisers they had a business relationship with - people who knew the area and who they could call to discuss a particular case.  Given that appraising is not an exact science, sometimes more information made the appraiser willing to reevaluate his figures.  Did this mean that loan officers selected appraisers who were more willing to consider new information or were more liberal?  Sure it did.  Was this always a bad thing?  The answer is a resounding "No!"

Arguably, some guidelines for communication might be order, but as written, the law is very inflexible.  It applies to all non-FHA and VA loans coved by Fannie Mae or Freddie Mac.

• Appraisers are appointed by third party Appraisal Management Companies (AMCs) which randomly select appraisers who might be from out of the area, new, untrained in the type of property involved, or not very good.  The appraisers might also come from an internal appraisal company that is separate form the loan division.
• The AMC gets a referral fee which is often passed along to the consumer, as the appraiser, already underpaid, does not want eat.  This means that the home buyer will have a higher fee to deal with and- also as a result of HVCC, will have to pay it upfront before closing.
• Appraisals are likely to take longer, a real inconvenience to customers especially when considering that other parts of the transaction are taking longer too. 
• The consumer gets a copy of the appraisal report three days prior to closing - a problem if the appraisal is so far off that the bank wants more down payment or refuse to write the loan or disagrees with the appraisal. Any discrepancies or updates will further prolong closings

Given the wacky Las Vegas real estate market, with its highly inllated and then bargain basement housing values, implementing this law should have some interesting results. Outraged lenders and real estate agents Realtors are calling for the regulations to be temporarily shelved.  Unless and until this occurs, real estate agents are preparing their clients to wait and have a few hundred dollars accessible to pay the appraiser. 

Yonas Woldu is ready to help you find an affordable house in Las Vegas, Green Valley, or other areas of Clark County and  help you navigate the system. If you are looking to purchase a home, including a short sale or bank owned home, visit Vegas Real Property website and my new AskYonas website.  If you want to claim the $8,000 new homebuyer tax credit, call YOnas today to assure that your loan will close in time.