New Appraisal Rules Lowball Homes for Sale In Everett

Appraisals are taken from Wrong Point of View

A major factor in why the market of homes for sale in Everett is so soft is the point of view of the appraisal. I think that the new HVCC appraisals will force a lowball approach to appraisals. If a willing buyer and a willing seller make a price that is the sales price. When many buyers and sellers agree to prices that is a market.

HVCC is the Home Valuation Code of Conduct. And it is a political rule made by a political person for political gain. It is delaying the recovery of our economy in its own not so small way.

The HVCC appraiser is hired from a risk adverse point of view. The lender wants no risk so he induces or even orders the appraiser to produce lower value appraisals. With a market that was normal or rising that would be ok. It might provide a check to speculation. That would be providing there was many lenders in the market and we had a free market. Something we haven’t had for a long time. Here is what happened to me just last week.

I recently spoke to a captured appraiser (one working for an AMC (the lender) not the buyer or seller) at a local watering hole. She was upset that the real estate agent had worked her over trying to get the appraisal increased by about 10%. She had valued the home for $335,000 and he said it was worth the freely agreed upon price of $365,000. She had included 2 foreclosed homes in the three comparables in the appraisal and they had driven the value down. Remember a willing buyer and seller agreed to $365,000. Her point of view was the buyer could be paying $35,000 too much.

Well she doesn’t set the market and that is not her business. The appraiser should only report the market not set it. The appraiser and by extension the lender is setting the market. Remember the lender ultimately doesn’t have to make the loan.

Many real estate professionals think the HVCC idea isn’t working. I think the HVCC appraisal has depressed the market of homes for sale in Everett. They have unnecessarily depressed the prices and perhaps prolonged the economies recovery.

If the appraiser is hired by the buyer the lender can always say no and not do the loan. So the argument that the lender gets an unbiased appraisal is simply wrong.

The National Association of Realtors says nearly one in four of its members has reported clients losing a sale due to appraisals. The National Association of Home Builders, meanwhile, said low appraisals were sinking a quarter of all new home sales and argues it’s not fair to compare distressed properties to brand-new homes. To which I wholeheartedly agree.

Part of the problem, critics contend, is that many real-estate appraisers are now hired under new industry rules. In some cases we have seen low cost appraisers hired from outside the area coming into areas where they don’t have market knowledge.

The HVCC rules are designed to limit conflicts of interest that can bias an appraisal, the rules bar mortgage brokers from ordering appraisals themselves, forcing them to do so through a mortgage lender. But the lender is a party to the transaction. The lender is risk adverse and will always lowball any transaction if they can. It is the nature of bankers to ask for more collateral. The appraisal was supposed to be independent from everyone in the transaction. By allowing the lender to hire the appraiser it distorts the value.

Nationwide an average of 40% of all sales were foreclosures. Foreclosures are at an all time high because of many factors outside the scope of this article.

Foreclosure sales should not be used as a factor in an appraisal for new homes or well maintained owner occupied homes. Right now it’s like there are 2 different markets for homes for sale in Everett. Investors and fixer uppers who buy the foreclosures and everyone else who buys the new/well maintained homes.

So right now the point of view of an appraiser and not a willing buyer ans seller sets the market value of homes for sale in Everett.

Jim Johnson and comments are always welcome.

Everett Mortgage on Line.