Last week Area Appraisal Management Company spoke at our Palos Verdes real estate office meeting to bring us up to date on the new appraisal rules – HVCC or Home Valuation Code of Conduct that went into affect May 1st. In the Sunday LA Times, Kenneth R. Harney wrote an article on the very same subject. They both gave the same information and it is not necessarily good.
Lenders can no longer order the appraisal themselves (and thus keep an eye on appraisal fees). They are now being ordered through a third party management company. Appraisal fees have gone up and the fee being paid to the appraiser is going down. Someone in the middle is pocketing the difference.
The appraiser management companies can send out any appraiser willing to work for the lower fee which means your appraiser can be from out of the area and not familiar with local values.
Lenders may not order a second appraisal if the first one is low. You are finished with that lender and must reapply with a new lender and start the process again.
The appraisal must be paid for upfront with a credit or debit card (instead of paying for it out of the proceeds of the loan) and there could be add-on fees such as no-show penalties ($50-100) or an additional charge of $50 to $150 if the property is worth more than $500,000.
Fannie Mae and Freddie Mac passed these new rules to improve the accuracy of appraisals and keep an arms length distance between the lender and appraiser. I don’t know if this is a knee jerk reaction to the financial mess experienced last year or a well thought out plan to restore some credibility in the lending market. Time will tell but we may experience a little pain in the meantime.
