You may have heard about the new changes in the appraisal laws for any Fannie Mae or Freddie Mac mortgages which took effect recently. Beginning May 1, the responsibility for managing home appraisals moved to a middleman, known as appraisal management companies or AMCs.
Under new federal regulations, mortgage brokers and loan officers can't directly order appraisals. Instead, they are expected to go through third-party AMCs, which are supposed to prevent them from pressuring appraisers.
One fall out of these new regulations is that there may be fewer indpendent appraisers since the majority of them will now be on staff. This means they may not be as knowledgeable about the neighborhood and/or unique property characteristics. This change also means that borrowers, mortgage brokers, and agents can no longer suggest comparable properties or discuss possible misunderstandings.
The new regulations are very likely to increase the number of appraisals which come in below purchase price. which will inturn drive more sellers to lower their prices to reach mutual acceptance. The news is filled with stories of homes not appraising. I recently realized that a low appraisal is exactly what several of my buyer clients are hoping for - negotiate a price that the seller will accept, and then pray for a lower appraisal which will hopefully force the seller to renegotiate the sales price to accomodate the lower appraisal.
I love knowing that my buyers are getting a good deal, and when they get a great deal, I am even happier, but..... and it is a big BUT. Please don't ever count on getting a lower appraisal than the sales contract price. I told my buyers who were planning to use this as part of their negotiating strategy that I could not agree to that strategy under any circumstance.
The contract price is just that - a contract. It is the real deal - that contract price, which you have to expect to pay. It is LEGALLY BINDING. If you dont want to pay the price in the contract you are about to sign, then DON"T SIGN. Please don't count on a second bite at the apple with a low appraisal. You may not get it and then where will you be? "Stuck" buying a house that you are convinced is overpriced. Won't you feel silly.
Happy hunting, and if you are looking in the DC metro area, give me a call.
Associate Broker and Attorney
Coldwell Banker Chevy Chase DC