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If you haven’t had your home appraised in a while, here are three important things you need to know because the process has changed — dramatically. And while appraisal qualifications haven’t changed over the past few years, the process has says Ken Chitester, the Appraisal Institute’s spokesperson.

1. Relationship between lenders and appraisers removed

The biggest change is that lenders and appraisers no longer work together — a method that many say was a breeding ground for appraisal fraud. “Lenders used to put all this pressure on the appraiser to inflate home values to hit certain numbers so that it was a win-win for all,” says Chitester.  At its core, the HVCC (Home Valuation Code of Conduct), which took effect May 1, 2009, was designed to prohibit mortgage professionals from hand-picking appraisers in lieu of using appraisal management companies (AMCs). And while fraudulent activity is down as a result of the HVCC, says Tim Coyle, a senior director at Real Estate & Mortgage Solutions, new problems have arisen (See next item).

2. Quality of appraisals

As for the quality of appraisers… Here’s the reality: ever since AMCs have taken over the appraisal process, appraisers themselves have paid the price — in more ways than one. “They’re not making as much money as they used to (Some appraisal management companies are paying about $200 for an appraisal that would normally pay $350-$400), and they’re expected to complete the process in unrealistic time frames,” says Chitester. As a result, he says, both the quality and level of competence of the appraiser has taken a hit. “We’re seeing the better residential appraisers leave the industry or move toward more lucrative areas within the industry.”  Indeed:  In 2007, there were nearly 99,000 licensed appraisers; at the end of 2011, there were just 87,000.

3. Deal or no deal?

Stats don’t lie: An astounding number of contracts are being cancelled — some 33% in January, 2012, alone.  That’s up from just 9% in January, 2011. Why the elevated levels of deals gone wrong? In large part, it’s due to lowball appraisals, according to the National Association of Realtors. Other reasons: something has gone wrong with the inspection process that cannot be remedied, or the buyer has either lost his/her job unexpectedly, or simply gotten cold feet.   Regardless, brace yourself for the possibility that your home may not be assessed at a fair value, putting you at a disadvantage.

Related:

How to Boost Your Appraisal
How Appraisals Work
Why the Property Price is of Low Importance

Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at http://veragibbons.com/.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.


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