3 Things to Know About Appraisals
1. Relationship Between Lenders and Appraisers
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. 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.
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.
More on Zillow:
How to Boost Your Appraisal
How Appraisals Work
Why the Property Price is of Low Importance
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