How to Prevent or Mitigate HVCC and AMC appraisal issues

This blog entry is more for sellers and realtors, but the issues are important for everyone. Buyers, too, should seek to work with lending sources who use local, experienced appraisers.

Although on its face, having a low appraisal may seem to benefit buyers, this is a short term benefit. Someday, perhaps sooner than expected, buyers will become sellers, and then the appraisal issue suddenly affects them in the other direction. So it behooves buyers also to have accurate appraisals.

The key is to have an accurate appraisal done by someone who knows the locale and the market. An appraisal fundamentally is still an informed opinion of value, but its quality depends greatly on the market knowledge and expertise of the appraiser.

Here are some things you may be able to do mitigate HVCC issues:

1. Get to know some good lenders that don't use AMCs. Smaller lenders can comply with HVCC by having a separate appraisal department that has no financial connection to the loan process. This rules out working with most big banks and mortgage brokers, but if you want local, experienced appraisers who get paid full fees, then this could make a difference.

2. If you're the listing agent, take the lockbox off the house and force the appraiser to contact you to arrange access. Prepare a comprehensive packet of information about the house (upgrades, amenities, and architect's floor plans are very useful, for example), information about any FSBO's in the neighborhood, recent comps, any good pending contracts that you know about. Don't discuss valuation, but there's nothing wrong with giving the appraiser information. which they can use or discard at their discretion. At least you tried.

3. If you're the buyer's agent, persuade the listing agent to do #2 but prepare the information packet for him or her. Better still, see if you can be the contact person for the appraiser and deliver the packet in person.

4. Find out if your lending source will allow you to reject the assigned appraiser. If you can ensure the appraiser contacts the realtor, and the realtor finds out the appraiser is not an expert in the local market, tell them you don't want them to come and get your borrower to tell the lender to pick another. You referred them to this lender, didn't you? It might slow down the process a bit, but better that than have the deal die.

5. Prepare your seller for the appraisal as if it were a showing, only more so. If anything, the house needs to show even better than it did for a potential buyer. Even good appraisers are affected by subjective criteria. A nice, neat, clean, quiet house, with no distractions, pets, kids, or owners around will allow the appraiser to get the inspection done more efficiently. Leave a small edible treat for the appraiser. Your packet will tell the rest of the story on the house. Keep the owners away and get them to make any obvious minor repairs if possible. You know how to stage houses, right?

Good luck!