Appraisals of Palos Verdes real estate along with real estate in the entire country have been challenging since the Home Valuation Code of Conduct was instituted last year by Fannie Mae and Freddie Mac who have been doing 90% of mortgage lending. The stated intent of this Code was to keep the appraisal process unbiased and impartial from the lender’s own interest. That sounded good especially after the financial meltdown but it had an unintended side effect that was created with the newly required appraisal management companies.
On Sunday in a LA Times article, Kenneth R. Harney asks “..are you as a buyer, seller or refinance applicant certain to be protected against inaccurate valuation produced by appraisers working for low fees who are unfamiliar with your local market?” Appraisal management companies have been sending out appraisers from out of the area because they are willing to accept the lower appraisal fee sometimes more than 50% less than their usual fee (the management company keeps the rest). The article goes on to say, “Since experienced appraisers generally refuse to work for such low compensation and rushed delivery demands, many appraisals are assigned to newcomers to the field. In some cases, critics charge, the jobs go to inexperienced appraisers who are willing to travel far beyond their home markets to get the assignment.”
With the passage of the new Wall Street Reform and Consumer Protection Act in July, replacement rules were to be isssued and will take interim effect in December and finalized in the Spring. Will this be a change for the better? We will have to wait and see. The initial reaction has been “no change”. Let’s hope more attention will be given to this matter. Please click here to view entire LA Times article.
