Whether buying a new property or refinancing an existing loan, it is essential to get a professionally constructed and detailed appraisal report. Since every property is unique, with marketability determined not only by set amenities like the number of bedrooms and square footage, but also by more nuanced factors such as the view, a seasoned, local appraiser is crucial. This is especially so in non-conforming areas such as Marin where architectural styles vary and geographic features distinguish small pocket neighborhoods, impacting values. Unfortunately, the Home Valuation Code of Conduct (HVCC) adopted by most lenders in May 2009 has made contracting a good appraiser a more tenuous prospect.
HVCC requires appraisals to be ordered through Appraisal Management Companies (AMCs) so that the eventual appraiser is relieved of any outside pressures influencing their valuation. Although the code was well intentioned, it seems to have created more problems than it originally sought to cure. While appraisal integrity is fundamental (no one wants to overpay for a home) the new system has infused ineptitude into the process, resulting in shoddy reports and costly delays that bilked consumers of over $2.8 billion in 2009. Understanding how HVCC has compromised the process and how to improve the odds of getting a good appraisal is even more important due to one of the code’s provisions: appraisals are no longer portable. So, if the lender you initially chose no longer has the best rate or ability to underwrite the particulars of your loan package, you may easily find yourself needing to go to another lender where you’ll pay for a new appraisal.
While some AMCs attempt to manage the process, most are little more than billing agencies that retain upwards of 50% of the appraisal fees collected. Since appraisers are now being paid half their usual compensation, most of the seasoned professionals have closed their doors and your report is farmed out to newly licensed, unqualified appraisers. Many of the national AMCs favored by larger banks are headquartered out-of-state. These remote AMC’s limit their “management” of the appraisal process to posting the order on their website for the first taker…often an inexperienced appraiser driving from outside the subject property’s area. Keep in mind that unqualified and underpaid appraisers have a built-in incentive to provide a “lowball” valuations since they haven’t the data or time to build a more realistic report. They also routinely miss strict lender guidelines, which can put your loan on hold.
Fortunately, there are measures that can improve the odds of getting a good appraisal.
Naturally, the first step is to determine which lenders have the best rates and products. Once you have found a lender, do not settle for a meaningless “pre approval,” but see that your file is actually underwritten. There are anomalies in every borrower’s file –even “rock solid” borrowers –and you don’t want to wait until the eleventh hour (and pay for an appraisal) only to discover they are unable to do your loan. Next, try to find out which AMC they are likely to use and try to get a sense of that company’s record through some online sleuthing. You should also ask how long the AMC is taking to issue reports to see if your lock or close of escrow date might be adversely affected.
Once the appraisal has been initiated, you should require that contact be made with the selling agent for access to the property. This way, when the appraiser calls, your agent can verify that they are familiar with the local market and qualified for the job. Your agent can also provide the appraiser with information on the subject property’s features and recent comparable sales in the neighborhood, including ones that may have occurred outside the MLS. Practical steps such as these should help insure that a proper appraisal report is issued and that your dream home is not lost to incompetent work or unfair comparisons to foreclosures or properties of lesser quality.
Nicholas Ballard is both a mortgage broker and banker specialized in the residential Marin market. For assistance, please call or e-mail:
Nicholas Ballard: 415-526-1941; firstname.lastname@example.org
Real Estate Financing
CA Dept. of Real Estate #01356374
California Mortgage Advisors, Inc.
CA Dept. of Real Estate #01170868
Redwood Highway, San Rafael