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HVCC is Here! Do you know how it will affect your business?

By
Mortgage and Lending with Platinum Home Mortgage NMLS ID#283159

Fannie Mae and Freddie Mac have published the Home Valuation Code of Conduct (HVCC). It is scheduled to go into effect on April 1, 2009 but lenders are requiring the information now. Much of the Code relates to appraisers and how appraisals are ordered, but the MCA (Market Conditions Addendum) will have significant impact on how you list and sell homes.

The Lowdown

Listed home within last 12 months - Appraisers must provide dates and must also report details if the property as been listed multiple times. You can help here; the information is required and approved loans are being held up at closing over this information.

Seller Concessions - Any seller or third-party concessions must be disclosed on the appraisal. This also includes updated or additional concessions AFTER the appraisal has been completed. You will have a big problem at closing if the concession dollar amount on the HUD does not match the appraiser's specific comments.

Large Acreage - If large acreage is not normal for the area, appraisers can no longer use, for example, only 5 acres out of a 40-acre parcel to determine value. They must count the entre value of the land (which may screw up the value UNLESS a new legal description can be created and it be legally separated prior to closing.)

New Construction - Appraisers can now use information directly from the Realtor or Builder instead of verifying with a third party servic as long as there are HUD-1s to verify sales prices of new construction comps. (Your title company could help you with this)

Overall Trends Comments - (This is where the landmines will be found)

  • The percentage of listings VERSUS actual sales over the past 6 months
  • Median Sales Price VERSUS List Price
  • Listing Price VERSUS Sales Price
  • Days on the market
  • Seller-Concessions VERSUS normal for the area
  • Extent of Foreclosures in the Neighborhood

It could "play out" this way. Your client makes an offer on a foreclosure or short sale (I would include regular listing but in SoCal we don't have any of those). Loan process is started and appraisal is ordered and because you are the professional you are the appraisal supports the value. 45-60 days later (longer if your in a short sale) the loan is submitted for final underwriting and because you are in a declining market as noted on the MCA (and just about every news source in the civilized world), the underwrter asks the Appraiser for 1 or 2 new comps no more than 30 days old (happening already).

Care to guess what happens to value if the new comps are lower than the ones originally used?

Care to guess what happens to your transaction if you have to go back and re-negotiate a new sales price (lower) with the bank?

I would be interested to here your thoughts.

Greg Cook

First Time Home Buyers Network

www.homebuyerhelpnetwork.com

951-265-4532 (mobile office)

951-699-7813 (Fax)

greg@homebuyerhelpnetwork.com

It's Too Important...DO IT RIGHT!

 

Comments (1)

Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

This could get interesting-looks like it could have an impact on our business.  Thanks for sharing.

Jan 14, 2009 06:21 AM