Appraisal rules rewritten poorly!

Appraisal rules rewritten poorly!

In a desire to curb abuses in home loan appraisals our government passed a law that became active on May 1^st of this year. The desire of this law was to curb the bad appraisals that occurred during the housing boom. The new law prevented appraisers from having contact with the lender or REALTOR involved in the transaction. This would prevent undo pressure to be brought on the appraiser to "come in at a certain price". It also prevents the real estate agent from telling the appraiser special features the home my have or the reason why the house down the street with no drywall was sold so low. Yes, you might say the appraiser will find that out when he visits the home but with this new process many appraisers are using pictures in the MLS as their home investigation and doing a drive by only. This lack of effort is partly caused by the low compensation the appraisers are receiving since the Management company is now taking part of their income. They need to do twice as many appraisals to earn the same amount of money they once did.

To protect themselves from liability, most lenders are ordering appraisals from appraisal management companies (AMCs), which intermediate between the lender and the appraiser. The AMC selects and pays the appraiser, receives and evaluates the appraisal, and passes it to the lender, which has no direct contact with the appraiser.

What could be wrong with this plan? Well after just a few weeks we now have a major problem. The AMCs don't have companies in every area so we now have appraisers from one county trying to do appraisals in another county. Their bias for certain areas is showing up with lower appraisals in many areas because they don't know the area or the different complex array of site issues. Many deals are being cancelled because of low value in the appraisals. Recently the National Association of REALTORS worked to get local appraisers doing local appraisals. Although this is suppose to be implemented immediately I don't see it happening.

The new rules is adding time to the mortgage process and preventing anyone from talking to the appraisal to remedy the situation. If a borrower has to change lenders in the middle of a transaction we can no longer use the first appraisal which adds cost to the borrower.

We need to get the housing market back on track and this new law isn't going to do it! Call your representatives today and demand they scrap this law and let the marketplace get back to creating value.