To review the results and the problem discussed in Part 1 see last weeks post titled Appraisals an Update Part 1
Lending professionals have always known that appraisals are art work, and that the value can vary about 5% based on property, transaction, and market conditions. Appraisals are in fact one person’s interpretation of the data gathered and the implications, expressed in their opinion, and demonstrated by the price they arrive at. If this trend of what could be called regulatory coercion continues, these are some predictable results we could see:
- Quality appraisers will be pushed out of business by decreased work and fees, no longer able to control their income
- A decreased number of appraisers will increase competition, driving prices even lower which could be good for the consumer if the reductions aren’t absorbed by the upper layers.
- Brokers and lenders can no longer communicate or coordinate with their former business partners, the appraisers, even if just to manage transaction logistics. This will cause additional transaction delays and push closings out even further.
- Inexperienced appraisers are getting work they are not yet competent to do even though licensed, and nobody can challenge or negotiate corrections without the additional cost of another appraisal with only the luck of the draw to get a competent professional.
In a free market economy willing buyers and sellers tend to drive up prices which is exactly what we need, commerce, yet the new appraisal rules must consider only old historical data and not local market conditions.
Finally, if you are purchasing a higher valued home, those above $800,000, you can expect to buy two of these appraisals so that your lender is very sure about the value. Oh, and guess which one of the two they will use? Absolutely, the lowest one. . .
The Home Valuation Code of Conduct is the demon rule and there is currently a petition by appraisers to repeal that ruling: www.hvccpetition.com
