Just because a buyer is willing to pay what you want for your property doesn’t mean that (s)he will be approved for it. This is especially true in the conforming loan space ($729.8k) populated by many first time home buyers in need of financing. The HVCC (Home Valuation Code of Conduct) was adopted by Fannie Mae and has been in effect since May 1st of this year. It changed how appraisers are engaged, from being hired by loan originators or brokers to now being hired by third party appraisal management companies (AMCs). The idea is to turn to companies with no vested interest in the appraisal’s outcome. Makes sense so far.
However, some companies are engaging appraisers who lack required Manhattan specific market knowledge, making it now commonplace for properties to come out either under or overvalued. Your property may therefore be appraised at a price that’s lower than what the buyer’s willing to pay. In turn, the lender can only lend at a particular loan-to-value based on that appraisal, leaving the buyer in a position to either put down more cash up-front or walk away altogether. Have a plan B in place, and know that negotiations may not be over with a signed contract. Check out our related post on Urban Digs where we discuss the options that buyers and sellers have in such a situation.
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Buyers and sellers need to keep the emotion where it belongs, in the purchase and sale agreement, and out of the appraisal process. The appraisal is strictly a way for lenders to satisfy regulators or underwriters that they have done their due diligence in regards to valuation of the collateral If you want the property, you should either have clauses in your purchase and sale agreement to allow for appraisal issues, or be ready to step up and pay what is needed to purchase it if you are the buyer (or accept your asking price was lower than the appraised value if you are the seller). Also, does anyone really think HVCC is the cure for appraisal coercion issues? I have worked at banks that have set up a separtate appraisal department to order and review all appraisals, and the minute the appraiser got the order from them, they called me and asked how much do you need the property to come in at? I am not saying all appraisers do or did this, but let’s be honest, it has and will continue to happen.
I had a teacher for an valuation class in high school. He was funny. He said the most important thing in getting a good appraisal on your house that you are trying to sell is to have hot coffee for the appraiser when he shows up to appraise the house.
Then, he said, you make comments on what you want the house to be listed for and if he sees any issues with that in order to write the appraisal.
Hot coffee is not a true measurement of house value, but I hope the point is well taken.
Jamal,
Can you imagine what might happen if all sellers had fresh hot baked cookies on a plate next to the hot coffee when the appraiser came to view their property?
Your point is well taken and also valid!
That’s pretty funny, actually. They say that smells make a big difference in terms of how buyers feel about a property when they first walk in, and that fresh baked cookies are the way to make a property immediately feel like a “home”.
Who says the same tactic doesn’t work for everyone else?
Now, the question is: chocolate chip? sugar? or oatmeal raisin?
Maybe they should use hot apple bread to fill the house with sweet aroma!
Don’t buy into the hype that appraisers from out of town are being hired to value properties.
Let’s say a painter from Long Island is hired to paint a house in NJ. You think he can pull it off?
Let’s say a math teacher from Massachusetts gets relocated to Texas. Can they still create a lesson plan and teach?
Get my drift people? All of this negative spin about out of town appraisers is from the Realtor and Mortgage broker groups- they have less control in strong arming appraisers now so they have to blame something for their crappy deals…….