Before going much further, it is necessary to have a clear understanding of what an HVCC is all about. It is short for the Home Appraisal Code of Conduct and came into effect on May 1, 2009. Its primary goal is to eliminate any fraudulent appraisals that have occurred in the past. Their goal is the honesty and integrity of the appraisers. This has affected all parties involved in real estate transactions.
While your goal is highly admirable, buyers, lenders, and appraisers are greatly affected by this ruling. Part of their rule is that lenders can no longer choose appraisers from their list, but can use in-house appraisers as long as they meet requirements specified in the code, such as their compensation not being dependent on appraised value. In addition, any party or broker that may benefit from the transaction would no longer be a part of the appraisal process.
Sellers are getting impatient with this new law. This is due to the longer mortgage application process. Also, because it takes considerable time, most sellers prefer the cash settlement. However, this is not in the buyer’s favor either, as most buyers rely on mortgages to buy a home and now find it difficult to get a loan due to the additional requirements. The process is also more stringent, making it more difficult to qualify.
Here are some effects of an HVCC on the mortgage application process:
1. The appraisers may be from a different area and this could mean the appraiser may be doing an appraisal in an area you are not familiar with. There may be a possibility of undervaluation when evaluating properties.
2. Because appraisers are randomly selected, this could also mean that lenders may end up hiring inexperienced appraisers.
3. There is a possibility of an increase in borrower cost since brokers are no longer considered part of the loan origination.
4. A possible undervaluation of the properties could cause problems for both buyers and sellers when negotiating in the event of a future sale.
5. This could result in consumers ending up paying an additional cost to lock in rates and finance the loan. In the event the lender changes, buyers may have to pay an additional fee for a new appraisal. In this case, many appraisers may not want to work with buyers as their fee would be relatively low compared to their previous fee.
Despite its goal, many are not enthusiastic about it. There are several issues raised by the HVCC law. This is probably due to the changes it has created in the traditional ways of the various processes involved. The valuation of most new appraisers is incorrect and this has been costly for most real estate agents. It will be some time before everyone can work with the new rule implemented. However, once everyone gets used to the new process and learns to appreciate your good intentions, everything will be back in sync. However, for now, adjustments need to be made.