Friday, June 5, 2009

Are Low-ball Appraisals Hurting Our Market?

Houses are still selling swiftly in East Bay. Limited inventory means that sellers are still experiencing the joy of multiple offers. Unfortunately, spirits are sometimes dampened by low-ball appraisals. Houses get into contract for a fair price, dictated by willing buyers bidding in an open market. This contract price is often diminished through the appraisal process when conservative appraisers are pressed by ridiculously conservative banks.

It's a tough job for appraisers. They have new guidelines for justifying their conclusions of value. They are being asked to provide a greater number of comparable sold properties than they have needed in the past. In addition, the timeline for these qualifying properties has shrunk from data collected within the last six months down to three. Geographical requirements have also been tightened. Some lenders are requesting comparable sales within 1/2 mile radius of the subject property. This process is complicated by our limited housing inventory and low sales volume. In short, appraisers are now required to produce more data, while obeying stricter guidelines, in a market with less turnover.

At the center of this debate is The Home Valuation Code of Conduct ("HVCC"). HVCC regulations prohibit lenders and Realtors from choosing or directly communicating with the appraisers. This means that sometimes out-of-area appraisers are chosen at random and are working to justify home values in a market they do not understand. Due to resulting low appraisals, legitimate loans are being turned down and Bay Area buyers turned away (with dreams crushed.) You can help by signing the petition, Request For Reconsideration of HVCC.

Note: When an appraisal comes in low, the buyer (with an appraisal contingency) can cancel their offer, try to renegotiate with the seller or elect to proceed under the original contract terms. Often the original price is the fair price. Yet, it is difficult for buyers to feel confident paying a price that the "expert", in this case the appraiser, tells them is high.

2 comments:

Anonymous said...

www.hvccpetition.com

End this madness

Berkhills Blogger said...

Anonymous, thanks for your support.