The Home Valuation Code of Conduct (HVCC) appears to be counter productive to the Obama Administrations position because the Administration is spending Billions of Constituent Dollars to stabilizing home values!!!
We must try to change this appraisal nightmare created by HVCC before it destroys any chance of stabilizing home values in all neighborhoods, whether they are very stable neighborhoods with very few sales comparisons, or neighborhoods riddled with “REOs” and “Short Sales”. Thus, delineating a historical sales market composed of a few willing Sellers, but mostly liquidators (i.e. REOs & Short Sales).
Jim Amorin’s, president of the Appraisal Institute, reflected the need for change before the U.S. House of Representatives’ Financial Services Committee when he said: “The Institute believes HVCC has too many shortcomings”.
HVCC appears to have fostered appraisals which are nothing more than glorified automatic valuation model-generated (AVM) estimates of value because their being done by appraisers from outside the local neighborhoods who have at best a limited knowledge of local issues affecting value.
My 38 years in the Real Estate Industry has provided some insights I’d like to share to help mediate the glaring short comings of the appraisals currently being performed under the HVCC directives:
* ALL REAL ESTATE MARKETS ARE LOCAL:
Assign only local Appraisers when possible.
* ALL COMPARABLE SALES ARE NOT EQUAL:
Appraisers adjusting for local issues effecting comparable value Appraisers adjusting for types of non-comparable sales, i.e.:
“Market Value” is determined between willing Buyers & Sellers.
“Market value” isn’t determined by “as is” REO & Short Sale liquidations.
“Market Value” has to be adjusted by the systemic risk of a “hold harmless” agreement in REOs which is being reflected in the Market.
* LOCAL MARKETS NEED MORE COMPARABLES TO CHOOSE FROM:
Increase the 90 day comparable window back to at least 6 months.
* CURRENT APPRAISAL MANAGEMENT COMPANYS (AMC) ARE PART OF THE ISSUE:
Assigning appraisers by rotation with no regard to proximity to property. Adding time to appraisal process – providing less time for the appraisal.
Reduced fees to Appraisers resulting in inaccurate appraisals by rushed professionals or assigning cheap, novice Appraisers.
Driving honest Appraisers from the profession, eliminating competition, increasing costs to consumers and reducing State & County revenues.
Selection of appraisers causing value inconsistencies, time delays and increased costs because of “rate lock” extensions or higher rates
This continual appraisal battle is creating great stress and financial hardship to all our constituents, whether they are refinancing, selling or purchasing!!!