What's the HVCC and what does it mean to Loan Officers, Realtors and Consumers?
Okay, first, I have a confession to make. The bank that I work for chose to be proactive and we began implementing the Home Valuation Code of Conduct on mortgage applications taken on or after January 12. Why did we do it so early? I’m not going to attempt to read the minds of the corporate people on that one.
I am going to share what I’ve learned about the Home Valuation Code of Conduct and what it means for lenders, Realtors and consumers. Please remember this is not a formal analysis of the rules of the HVCC, this is strictly my personal experience of what it means:
The Five Most Important Things About the Home Valuation Code of Conduct:
1. For consumers – it means that the cost of an appraisal has gone up. 6 months ago, a standard appraisal in my area would cost between $275 and $300. Now, that same appraisal is going to run $375. What does the consumer get for his additional $75? Basically, he gets one thing. He gets a bit more comfort that the appraiser isn’t necessarily a friend of the Realtor or the lender and he doesn’t need to be as concerned that the appraiser is being pressured by someone to “meet a number” so the deal gets done.
2. For Realtors – it means that they can’t rely on “a friend” to get the deal done. The days of working with the local appraiser who knows pretty much the entire market are over. Now they have no impact on who does the appraisal. So what does that mean? It means that they are probably going to be getting some appraisers who don’t know the market as well. What does that mean? It means the Realtor has to not only know the market, they have to have the data available and be able to pass that information quickly and easily to the appraiser. I don’t believe that it would violate any rules if the Realtor were to look up what they feel are the 6 best comparables, print the information and have it waiting at the house when the appraiser went through.
3. For Lenders – the days of calling up an appraiser to “see what they think” about the value of a house are gone. I was talking to a prospective refinance client the other day and he didn’t qualify for the “Obama” loans because he was pulling cash out to pay off a rental property. Whether the deal would do what he wants would depend on the appraisal. I used to be able to call an appraiser and discuss the deal with him and give the client a “good feeling” about whether it would work or not. Not any more. Now I had to tell the customer to check www.zillow.com or talk to a local Realtor and do their own research to determine whether it was possible to get that value and whether it’s worth spending $375 to “try it.” The opportunity to help with advice and counsel in that way is now gone. On the flip side, consumers don’t need to worry about an unscrupulous lender pressuring the appraiser to get a “higher” than true value so the deal would close.
4. For Everyone – time. This is probably the biggest difference with the HVCC. I remember a transaction where we got the appraisal done in 24 hours so that the buyers could take possession of the house when they got back from their honeymoon. That wouldn’t happen any more. Plain and simple, the layers of management, administration and quality control that have been put between the front line lender and the appraiser are making anything less than a 2 week turn around time somewhat miraculous. Oh, and it makes it very important to make sure when you are writing a purchase agreement and/or locking in an interest rate that you give it enough time for today’s realities.
5. For Everyone – coordination. Nope, I’m not talking about the ability to dance or ride a bike or anything like that. I’m talking about coordinating the details on a file. The client, the Realtor and the lender need to be in constant contact between when the purchase agreement gets signed, inspections done and the appraisal ordered to make sure that not a day gets missed. I had a file earlier this year where I talked to the Realtor in the transaction two days before inspections were to be done. I said, “Let me know when inspections are done so we can order the appraisal.” He neglected to let me know and I didn’t follow up with him for a number of days. Long story short, it was a bank owned property, the delay due to the appraisal cost the buyer $100 per day and I made $300 less on the deal because I felt at least partially responsible for the delay. Those type of delays are not tolerable in today’s market and you need to work with people who are organized enough to avoid them.
Is the HVCC a good thing? I’m not so sure that it is. But, is the HVCC the end of the world? Nope, it’s not that either. It does prevent the unscrupulous lenders and Realtors from blackmailing appraisers, but it also adds a layer of bureacracy and red tape that is hard to work through.
So, let’s all take a deep breath, work with the system and make the necessary adjustments.
We’ll be fine.
If you are organized, patient and plan ahead, the HVCC is an obstacle that can be overcome.