On May 1st 2009, the new Home Valuation Code of Conduct came into force, with major consequences on your real estate transaction.
Here are the main issues:
- appraisals are not ordered directly by the bank or the realtor, but rather through a "clearing house" that uses a roster and a rotation system to decide which appraiser will be completing the appraisal. Even if appraisers have their area of expertise, that expertise wont come into play.
- realtors can not communicate with the appraisers. Realtors can not offer information about the property,suggest comparable properties or dispute/question the result of the appraisal. Since sometimes it is hard to find recent sales in a neighborhood, realtors could help by suggesting comps in areas that may be overlooked otherwise. In the past three months, I have received many calls from appraisers that simply needed to " pick on my brain" in an effort to find comps for a subject property or to learn why a certain unit in the complex would be worth $50,000 more than another one with the same square footage, for instance. Or whether a credit was given to the buyer at the time of purchase and the information is not public.
In a nutshell, if you are a buyer or a seller, here is what you can expect, as a result of the implementation of this new code:
- longer turn around time for appraisals. Estimated time now is 2-3 weeks, compared to 2 to 3 days, previously;
- longer time for a loan to be put together. Typical financing process will require 45 to 60 days;
- longer escrow times, that is 45 to 60 days;
- direct communication with the appraiser, in an effort to make sure that the property is appraised justly. This may be challenging when you are an out of state owner and you may need to do your own research in regards to market values.
- higher appraisal fees, since someone will have to be paid to do the job of maintaing the list of appraisers and ordering the appraisals according to the rotation system.
While I see the need to prevent further abuse and misuse of appraisals in the real estate business, I also think that the code is an exaggerated reaction to what happened in the past. I surely hope that a balance between preventing fraud on one hand and doing business in an efficient way on the othe hand, can be attained.
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