Tag Archives: HVCC

Battling Low Appraisals

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Battling low appraisals.  In the past few months I’ve had agents call me from all over the country asking how we’re handling properties that sell for more than the appraisal.  We’re tied into dozens of private Realtor discussion boards, Realtor networks, and organizations and this topic has been popping up frequently, so we thought we’d take a moment to help those in SW Florida with some tips we’ve learned over the years to combat this problem.

Battling Low Appraisals

Let’s identify the problem.  Appraisers are looking in the past for data that supports today’s value, but the problem in a rising market is that the data in the past is lower by definition because prices have been rising.  When a market is on the move appraisers can make a time value adjustment but it seems they’re quicker to make adjustments in a declining market than they are in a rising market.

Here are some tips for agents to get appraisals up to market value:

  1. Once property goes pending make showings by appt only.  When appraiser calls meet them out there with comparables you used to value the property.  Appraisers have a difficult job.  They’re underpaid and expected to turn these around within a day or two.  If you have legitimate information that may help them it is usually welcomed.  If you go in with an attitude and trying to persuade them to come in with a value just because you need a sale at a certain price it won’t work.  Appraisers legitimately want to get it right; they just need facts that fall within accepted guidelines to backup the value they issue.
  2. If the loan was placed with a mortgage broker and not a direct lender and you feel the appraisal is bad, the mortgage broker can request an appraisal from a separate appraisal management company if the lender they’re brokering it to accepts from more than one management company.
  3. Since HVCC (Home Valuation Code of Conduct) went into effect May 1, 2009 lenders can no longer work directly with appraisers.  This is why agents may only get one chance to talk to the appraiser at the time they inspect the home.
  4. FHA appraisals are good for 6 months, so once it’s completed you’re pretty much stuck with that value.  You can dispute a FHA appraisal and provide documentation and it can be amended, but this is not guaranteed.
  5. The seller can pre-pay the mortgage insurance which might eliminate the need for the property to appraise
  6. If an out of town appraiser calls with an order to appraise the home, don’t let them in.  Call the lender and tell them you want an in-town lender and to re-order with another appraiser.  Over the years out of town appraisers unfamiliar with the local market have wrecked many deals.

 

Remember one thing about the new HVCC.  They have cut what they pay the appraisers and shortened the time the need results.  When you call an appraisal management company to ask for business the typical question is what is your cheapest price and fastest turnaround.  This isn’t always conducive to an appropriate value on the home.  Perhaps one day somebody in authority will re-work this process as it can hold back the real estate market.  Thank Goodness we have cash deals bolstering the market.

If you’d like to search the MLS, visit our website at www.Topagent.com  If you’re considering selling and would like the Ellis Team to show you what we think we can get for your home, go to www.SWFLHomevalues.com or call us at 239-489-4042  Good luck and Happy Selling!

To search the MLS for properties go to www.TopAgent.com or give us a call at 239-489-4042     Good luck and Happy House Hunting!!!

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What is Your Home Worth?

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This is another question we get asked a lot and the quick answer is value is in the eyes of the beholder.  It also depends on who you ask.

If you ask the seller, they’ll tell you about how they personally built the house, what kind of insulation is in the attic and walls, how many screws are holding up the shelves in the kitchen pantry, how they clean the solar panels on the pool twice per month for maximum longevity, how they just cleaned out the dryer vents, the fact that they imported fruit trees from Malaysia for maximum fruit yield, and the date and time each fruit tree was planted.  All of these things carry emotional value to the seller and should equate to monetary value in the seller’s eyes.

Value is in the Eye of the Beholder
Value is in the Eye of the Beholder

The lender wants to know how sound the buyer is, if the homeowners association is fiscally sound, and the opinion of value from the appraiser.

The property appraiser looks at value from last year and tells you what they think your home used to be worth last January 1 based upon sales from last year.  This is done on a mass-appraisal system because the property appraiser cannot possibly do a full-blown appraisal on all parcels in the county.  While this is a monumental task, the property appraiser is at a big disadvantage ascertaining actual value on any one particular property because of the scope of the task.  While we would never rely on the property appraiser’s assessment of value due to these issues, we are amazed at how many times they do a good job of getting in the ball-park or close to value, but they are subject to error because the values are based upon a previous time frame and done on a mass scale.

This brings us to the last two people in the equation; buyers and appraisers.  Buyers look at several homes and size them up against one another.   Buyers are always on the lookout for property that meets their needs, and presents the best value to them.  Typically they’ll make an offer on the best value property that meets their needs.  They don’t often waste time by offering on over-priced properties; they go straight for their favorite and offer there.  Only when negotiations fail on their favorite do they typically move on to their second choice, so over-priced sellers remain the bridesmaid instead of the bride.

Lastly the appraiser becomes involved.  Since May 1 there has been a new governmental rule in effect called the HVCC (Home Valuation Code of Conduct).  It was intended to improve the appraisal system and provide more accurate appraisals, but as is anything government related, it’s been a disaster.  Appraisals have been far from accurate, and you could easily argue that the mass appraisal system the local property appraisers system uses has been far more accurate than some of these appraisals.

The HVCC setup a management company to act as a middle-man so to speak.  Costs to consumers have gone up, and turn around times have increased.  The lowest priced appraisers have gotten many of the orders, so consequently many appraisals have been handled by out-of-town appraisers unfamiliar with our local values.  The management companies give appraisers little time to do their work-typically 2 days, but appraisals take sometimes weeks to receive back because the middle-man has to review them.

FHA accounts for 70% of the financing today, and if you get a bad appraisal you’re stuck with that value for 6 months under FHA.  We’ve seen many properties under-appraising by $70,000 and more.  The sad thing is the buyer wants to buy the property, and the sellers wants to sell, but the faulty appraisals are preventing not only the current buyer, but also future buyers from purchasing the property.  It is literally forcing many properties into foreclosure.

You can literally blame the Federal government since May 1 for wrecking our market.  Oh, we can’t blame them for all the faults leading up to May 1, but we’re in serious recovery mode right now and the new HVCC system is preventing prices from moving when they should, and sales from occurring when buyers and sellers want to do business.

The banks are powerless.  Even though they want to lend money to a qualified buyer, the faulty appraisals are preventing it, and appealing the process is almost futile.  A loan officer cannot speak with an appraiser, and the appraiser has total control, even when facts are presented clearly showing value is present.

We recently had an appraisal done where the appraiser would not use a comparable two houses down, but preferred to use a foreclosure two neighborhoods over.  The neighborhoods were not the same.  The appraisers are so afraid a bank may come back on them later that they’ve gotten too conservative, and many times use poor condition and gutted properties against good condition properties.  Appraisers should be worried buyers could sue them to level the playing field, and in fact one state has introduced a law stating just that.

Congress really needs to step in and fix this mess.  The government created it through additional regulation, and the unintended consequences are wrecking the market, and this market needs help, not an outside entity kicking it when it’s down and trying to get up.