The Blogosphere is Hot About Appraisals
August 4, 2009
The interesting phenomenon that is influencing real estate sales is the new "Home Valuation Code of Conduct" (HVCC). These new appraisal processes are keeping the normal pressures of low supply, high demand from having a significant effect on the price of houses.
The blogosphere is full of tales of multiple offers - anywhere from 2 -above 20- on properties listed. Short sellers and banks seem to be using the strategy of listing low and letting buyers bid the price up. Normally this movement toward higher selling prices would help stabilize and even improve values. But - the new HVCC has had the opposite effect. Appraisers are selected at random and, according to blogs, often not familiar with the local real estate market place. Since sales in previous months, particularly in some price ranges, were very limited, the appraisals often come in under the selling price. The HVCC was designed to protect consumers from fraudulent appraisals, but instead has caused sales to be cancelled because buyers can no longer get a loan. One blogger renamed the HVCC "HaVoCC" which is somewhat appropriate for what it has done to real estate transactions.
Even though a field appraiser may appraise the property at the selling price, a "desk" appraiser or underwriter will review the appraisal and without seeing the property, reduce the price. This review is just before the closing date and does cause havoc.
Unless a buyer is an investor with cash or a buyer willing and able to pay over the appraised value, appraisers are controlling the market value of real estate sales. While appraisers have always had a role in confirming market value, market value was typically set by a willing seller and a willing buyer, ready and able to perform.
Lets hope that the proposed bill to put a moratorium on the HVCC will be passed by Congress.
The HVCC is clearly a law with unintended consequences.
Just google HVCC Appraisals and you will turn up some articles on the problem.
The interesting phenomenon that is influencing real estate sales is the new "Home Valuation Code of Conduct" (HVCC). These new appraisal processes are keeping the normal pressures of low supply, high demand from having a significant effect on the price of houses.
The blogosphere is full of tales of multiple offers - anywhere from 2 -above 20- on properties listed. Short sellers and banks seem to be using the strategy of listing low and letting buyers bid the price up. Normally this movement toward higher selling prices would help stabilize and even improve values. But - the new HVCC has had the opposite effect. Appraisers are selected at random and, according to blogs, often not familiar with the local real estate market place. Since sales in previous months, particularly in some price ranges, were very limited, the appraisals often come in under the selling price. The HVCC was designed to protect consumers from fraudulent appraisals, but instead has caused sales to be cancelled because buyers can no longer get a loan. One blogger renamed the HVCC "HaVoCC" which is somewhat appropriate for what it has done to real estate transactions.
Even though a field appraiser may appraise the property at the selling price, a "desk" appraiser or underwriter will review the appraisal and without seeing the property, reduce the price. This review is just before the closing date and does cause havoc.
Unless a buyer is an investor with cash or a buyer willing and able to pay over the appraised value, appraisers are controlling the market value of real estate sales. While appraisers have always had a role in confirming market value, market value was typically set by a willing seller and a willing buyer, ready and able to perform.
Lets hope that the proposed bill to put a moratorium on the HVCC will be passed by Congress.
The HVCC is clearly a law with unintended consequences.
Just google HVCC Appraisals and you will turn up some articles on the problem.
posted by shirley harry at 8:19 AM
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