The Five Most Important Things about the Home Valuation Code of Conduct

What is HVCC?  This is the Home Valuation Code of Conduct that was enacted to help enhance the integrity of the home appraisal process in the mortgage finance industry, in March 2008.  Here is a list of the five things you need to know as consumer, lender, realtor, and everyone involved.

1.  For consumers-it means that the cost of an appraisal has gone up.  A year ago a standard appraisal in our area would cost between $275 and $300.  Now, that same appraisal cost about $375.  What does the consumer get for the additional $75?  Basically, he gets one thing.  He gets a bit more comfort that the appraiser isn't necessarily a friend of the Realtor or the lender and he doesn't need to be as concerned that the appraiser is being pressured by someone to "meet a number" so the deal gets done. 

2.  For Realtors-it means that they can't rely on "a friend" to get the deal done.  The days of working with the local appraiser who knows pretty much the entire market are over.  Now they have no impact on who does the appraisal.  So what does that mean?  It means that they are probably going to be getting some appraisers who don't know the market as well.  What does that mean? It means the Realtor has to not only know the market, they have to have the data available and be able to pass that information quickly, and easily to the appraiser.  It does not violate any rules if the Realtor were to look up what they feel are the 6 best comparables,  print the information and have it waiting at the house when the appraiser went through.

3.  For Lenders-the days of calling up an appraiser to "see what they think" about the value of a house are gone.  Will a deal work for a prospective refinance client who wants to pull cash out to consolidate some debt would depend on the appraisal.  We in the industry used to be able to call an appraiser and discuss the deal with him and give the client a "good feeling" about whether it would work or not.  Not any more.  Now we have to tell the customers to research it on Zillow.com or check with their local Realtor to see if it was possible to get the value and whether it's worth spending $375 to try it.  The opportunity to help with advice and counsel in that way is gone.  On the flip side consumers don't need to worry about an unscrupulous lender pressuring the appraiser to get a "higher than true values so the deal would close.

4.  For Everyone-Time.  This is probably the biggest difference with the HVCC.  The days of an appraisal to get done and back in 24 hours so that buyers could take possession of the house when they got back from their honeymoon.  Plain and simple, the layers of management, administration and quality control that have been put between the front line lender and the appraiser are making anything less than a 2 week turn around time somewhat miraculous.  Make sure you allow enough time in your purchase agreement or locking in an interest rate that you give it enough time for today's realities. 

5.  For Everyone-coordination. The client, the Realtor and the lender need to be in constant contact between when the purchase agreement gets signed, inspections done and the appraisal ordered to make sure that not a day gets missed. 

Is the HVCC a good thing?  I'm not so sure that it is.  But, the HVCC is not the end of the world. It does prevent the unscrupulous lenders and Realtors from black mailing appraisers, but it also adds a layer of bureaucracy and red tape that is hard to work through.