More real estate hassle: New rules make home appraisals pricier, harder

Another cost to home buyers and sellers -- appraisals of a home for sale -- is going up, and going forward, it will likely take longer to get an appraisal done.

A new layer of red tape is adding $100 to the cost of housing appraisals as a result of a May 1 change in how loans are purchased by Fannie Mae or Freddie Mac, according to a New York Times story.

The Home Valuation Code of Conduct was designed by regulators to protect appraisers from undue pressure from interested parties, such as real estate agents. The housing crisis was partly blamed on faulty appraisals, so the change in how they're done is meant to fix that.

Instead of brokers and real estate agents ordering appraisals, lenders are in control.

Without the house appraising at the price you're buying it for, the loan won't go through.

The new rules forbid providing an appraiser with an anticipated, estimated or desired value for a property; withholding or threatening to withhold payment or future business from an appraiser; and ordering up a second appraisal without a reasonable belief that the first one is flawed, according to a story.

So instead of hiring an appraiser yourself, the lender must do it, adding more red tape and the lender's costs to the appraisal. Mortgage lenders can contract with a disinterested third party, such as an appraisal management company, which will have its hand out for your money and increase the cost of the appraisal.

That's leading to appraisers earning less, but the management companies are taking their share of the appraisal fee process by still charging consumers about $500 for an appraisal, up from $400, according to the Times story.

Appraisals are also taking longer to get done, in part because the management companies are hiring appraisers from far away who don't know the area. So instead of getting someone quick and local who your real estate agent likely knows well, an appraisal can now take a month, according to the Kiplinger story.

The good news is that legislators in Washington, D.C., are being asked to suspend the code until 2011 to get the kinks worked out. Home buyers can't wait.

Aaron Crowe is a freelance journalist in the San Francisco Bay Area. Reach him at
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