“Real Estate Values Being Hurt in Manchester, CT and Around the Country”
One of the biggest white collar crimes today, is how HVCC (Home Valuation Code of Conduct), has affected real estate values, throughout the US. Here is an example of what I am talking about. Most everyone in the mortgage and real estate community understands only to well.
I did a mortgage for a client buying a home in Manchester, CT. Pretty simple transaction, the purchase price was $230,000 and miraculously the appraisal also came out to $230,000, funny how this happens. The transaction closed, like I said pretty simple.
Two weeks before the transaction closed, a new client came to me, to do a refinance. Here is the thing, two streets away from the transaction above, same development, same square footage. The only difference was the color. In discussion with the borrower, he estimated the value between $228,000 and $230,000, which certainly seemed pretty reasonable, based on my knowledge of the sale, two streets away.
The appraisal was ordered and 11 days later the appraisal came in at $208,000. When I reviewed the appraisal, two of the same comparables were used, but the adjustments made the numbers come out completely different. So, how is this possible?
The appraisal company also sent a copy of the appraisal to our borrower, who called us to find out what is going on. These are extremely difficulty conversations to have with a borrower. These appraisal companies create so much unnecessary chaos.
I sent the lender a copy of the appraisal that was done on the property that was sold for $230,000 and asked them to review the two appraisals and explain to me, why there is a $22,000 difference in the two appraisal. The lender, then sent the two appraisals to the AMC (Appraisal Management Company), for an explanation. After 9 days, the AMC came back saying that the appraiser would change the $208,000 appraisal. Unfortunately, once a line in the sand is drawn, it’s tough for someone to acknowledge that they made a mistake.
I reported all of this information to our borrower and recommended that, we move the loan to another lender, but explained that a new appraisal would have to be paid for, fun conversation. The reason the $208,000 value was not acceptable was that our borrower would have had to pay mortgage insurance, for no reason. The borrower agreed to pay for another appraisal, so that I could move the loan to another lender. We moved the loan, another appraisal was done, the value came in at $228,000, the loan closed.
Our borrower was still upset about the first appraisal, so much so that he filed a request for return of the $400 that was paid, he filed a complaint with the CT. Banking Commission and the Dept. of Consumer Protection. Maybe if enough complaints happened, maybe HVCC would get repealed.
HVCC, has done as much to hurt values in the US as the so called housing bubble. I have spoken to many appraisers about this issue. Here is what they tell me. They are afraid to not keep values down, for fear that the AMC they are working for gets upset and send them no more business. The AMC’s have put the fear of GOD into the average working appraiser, so that they can keep feeding their families. HVCC was sold to Congress and Senate, that it would protect the public from unscrupulous lenders and appaisers. With friends like this, who needs enemies? The HVCC system needs to be repealed and we need to stop protecting the public, by hurting their real estate values.
By the way, here is a testimonial that Andy, my client, wrote:
“Sitting down with Joe is always a pleasure, he takes pride in his work, and in his knowledge. Joe also takes great pleasure in helping those who seek his expertise.”
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