Effective May 1, 2009 the Home Valuation Code of Conduct went into effect. What this actually says is that any loan that will be sold to Fannie Mae or Freddie Mac must follow specific guidelines in conjunction with the appraisal. In theory this seems to make a lot of sense however in the real world it just is not working. Per the guidelines, lenders are not allowed to have conversation with appraisers. Appraisals are ordered through an Appraisal Management Company with the cost of the appraisal remaining constant so as not to negatively impact the borrowers. These management companies have to get paid somehow. So what happens is they take a portion of the appraisal fee and send the balance to the appraiser. I have heard that in some instances the management company takes as much as 50% of the appraisal fee.

The thought of not having lenders communicate directly with appraisers would make sense from a mortgage fraud reduction standpoint. What doesn’t make sense is with the decrease in income, appraisers must now, in some instances, perform twice as many appraisals to earn the same income they had prior to HVCC. So how does this effect borrowers? What is happening in the market place now is that appraisers that are willing to work for the lower fee are the ones
being hired by the management companies to perform the appraisals. You get what you pay for, from the borrower’s standpoint, is not the case! With the appraisers having to perform twice as many appraisals to earn the same income something has to give. Based on a recent transaction I think what gives is the quality of the appraisal. Let me share with you some of the events regarding the appraisal on this transaction.

I was contacted on or about June 29, 2009 by Mr. Peters of A. P. Appraisal Services of McDonough, GA regarding how to obtain access to the subject property. I informed him that the property was on both a Supra Lockbox as well as a Contractors Lockbox, and I gave him the code to use the contractor’s lockbox. Due to the fact that the home had been inspected the previous Friday, I informed the appraiser that the heat, air conditioning and hot water heater were not operating. I informed him of the inspector’s exact findings regarding these 3 components knowing that they should be included in the appraisal due to FHA financing. Little did I know at this time that the A.P.in A.P. Appraisal stood for “ASS POOR”! Let me share with you some excerpts from the appraisal:

Median Comperable sale price $157,000 in the past 7-12 months
Median Comperable sale price $144,750 in the past 4-6 months

The subject was inspected on 6/30/2009. The following repairs were noted at the time of inspection.
1.) Kitchen faucet is not operating correctly. Hot water is not working . Have a licensed plumber inspect and make repairs.
2.) HVAC was checked. Heat was not checked due to the temperature being over 90 degrees on the day of inspection.
Kitchen faucet repairs are needed for the subject to meet minimum FHA/HUD property standards. Estimated cost to cure is approximately $300.00.
Subject is below predominant price within the immediate area due to being surrounded by higher priced homes and being sold out of foreclosure.
Appraised value of $109,000 is slightly below the contract price of $109,900.00 due to the consideration of comparable saels and listings within the area with similar style, size, and condition. (At least use spell check when preparing a formal document)

The reason that I waited until today to write this article was that the appraiser had to do a final inspection prior to closing and I didn’t want to jeopardize anything for my client. When the appraiser called me to once again find out how to gain access to the home for his final inspection he asked how the heat, A/C and water heater problems were corrected. It was all I could do to resist telling him exactly how stupid he is. I informed him that the heat and A/C systems were totally replaced and the igniter on the water heater was replaced (Which is what I told this dumbass would cure the problems to start with)

I shared the information in the appraisal as far as value at $109,000 vs contract price at $109,900 with an appraiser that I know and was informed that no appraiser can come that close on an appraisal. When I shared the above comments on the appraisal I was informed that this appraiser must be an idiot. It is almost as though he was singlehandedly trying to establish the market rather than interpreting the market as he is supposed to do.

After reviewing the appraisal even further I found several mistakes which were communicated to the lender who in turn had to communicate them to the management company who then had to communicate them to the appraiser who then had to respond to the management company who had to respond to the lender, Oh well you can see how utterly efficient the HVCC is. The mistakes that I found were as follows:

Appraiser says 3 bedrooms…Actually there are 4 and this is substantiated by the tax records….

Appraiser says 2 bathrooms…Actually there are 3 once again substantiated by the tax records….

It seems to me that the addition of a bedroom and a bathroom would more than make up for the $900.00 shortage in the appraised value.

I end this article with a word of caution to anyone stuck with using ASS POOR Appraisal Services form McDonough, GA, WATCH OUT!