HVCC impacts Simi Valley Homes For Sale

HVCC – HOME VALUATION CODE OF CONDUCT

History:

New York Attorney General, Andrew Cuomo investigated Fannie Mae and Freddie Mac appraisal practices. Fannie and Freddie (with the Office of Federal Housing Enterprise Oversight (aka – OFHEO) agreed to adopt new changes to how appraisals are processed in the mortgage industry in exchange for an end to the investigation. The HVCC arose out of this agreement and contains many positive and needed guidelines to clean up the industry. Unfortunately as with most bureaucracy, the agreement contains changes to how brokers and agents are able to work with appraisers. These changes will significantly impact the value of your Simi Valley home, impact the process of selling your Simi Valley home, possibly raise the costs to the buyer of your Simi Valley home and create higher risk for a buyer to enter into an escrow on a Simi Valley home purchase. 

What The HVCC means for Brokers:

1. Brokers (meaning, anyone compensated by commission tied to the loan) i. may not choose the appraiser(s) to be used for loans they originate and ii. may not engage in any communication with the appraiser(s). The selection of appraisers and all communication with appraisers is now in the squarely in the hands of the lenders. 

This means that brokers are not allowed to choose appraisers. This is important in that appraisers have traditionally been chosen based on quality of work and knowledge of the area they are appraising. This loss of  control of an integral part of the loan origination process, can possibly increase loan funding times and increase costs to the consumers in the form of longer rate locks and the need to order new appraisals if there is a need to change lenders.

1. Appraisals are made in the lender’s name and not the broker’s, if there is a need to choose a new lender for the transaction, then a completely new appraisal will need to be ordered. This will increase consumer costs and the time involved in the transaction.
2. Broker relationships with appraisers are rendered meaningless overnight.  Brokers will lose control over Simi Valley Real Estate transactions as appraisal clearing houses will assign appraisal work orders without regard to whether their appraisers have local knowledge for the area they are about to appraise.

What it means to Appraisers:

1. Appraisers must be registered with Appraisal Management Companies (AMC’s). Independent appraisers no longer exist and are forced into a relationship with an AMC. This forced relationship will cause the appraiser to give 40% or more of their income to the AMC. The average appraisal in the Simi Valley – West San Fernando Valley area runs approximately $400.00.  Now those appraisers will make $340 for the same work.  We can all assume with such a reduction in income, what might happen to the quality of the appraisals.  Appraisers that worked hard to build relationships and reputations for high quality work have overnight been stripped of their stature.
2. Appraisers can no longer engage in ANY communication with mortgage brokers, loan officers, agents, or others that may receive a commission in relation to a transaction. This is a unique predicament… appraisers are not allowed to talk to their clients, a restriction not placed on any other industry. Again, relationships and reputations appraisers have built are rendered meaningless overnight.

What this means to Sellers:

1. Delays.  The Buyer no longer has control over timing with the Lenders.  Lenders can just “blame”  the HVCC process if things are going slowly.
2. Increased time to process loans as brokers no longer control scheduling and  managing appraisals. This may necessitate longer rate locks or extensions of existing locks an expense to your buyer. This may also make it impossible for your buyer to adhere to the contractual time frames.
3. If the appraiser sent out from the AMC is new to your area or has not done appraisals in your area; they could significantly underestimate the value of your Simi Valley home unjustly.   Most areas like the homes for sale in Simi Valley have closing sales data located in several different data bases.  Ventura county and more specifically Simi Valley, has a distinction that the data crosses over into Los Angeles County.  Membership to multiple data sources in imperative to get the correct data to create a proper valuation.  Appraisers assigned from AMC’s that are not cognizant of this local anomaly can create serious problems for the buyer and seller of properties in Simi Valley and East Ventura County. 
4. The HVCC is an attack on your Simi Valley home’s true value as appraisers that have long term experience working certain the Simi Valley area may no longer be assigned the Simi Valley area.  The appraiser that is coming to a Simi Valley home for sale may not be “local” or have the necessary local knowledge for the idiosyncrasies that are endemic to Simi Valley homes for sale.
5. If the HVCC process causes a buyer to back out voluntarily or involuntarily, now you are back at square one.  Consider, that loan requirements and programs could have changed over the last few weeks; interest rates could have gone up and competing properties could have come on market since that buyer entered escrow.  Your next prospective buyer is now beginning the same process all over again.

What this means for Buyers

1. Delays.  A bad appraisal on a Simi Valley home for sale  you truly love and truly want to purchase will not help you get a “steal” on a Simi Valley home. A bad appraisal will only upset the seller and could ultimately cause your purchase to fall apart.  You will have money invested into the appraisal and inspections that will not be refunded if a bad appraisal kills your purchase.
2. The new process for ordering appraisals through the AMC can cause delays making it impossible for a buyer to remove financing contingencies in a timely manner causing tension and frustration for both the buyer and the seller.

While most agree that there needs to be better regulation and oversight on the appraisal business, the HVCC goes too far.  Good reputable appraisers exist in every trade area, they should not be penalized for the those that have created the problem.  Since the government has chosen to create rules that will negatively impact an already fragile Southern California Real Estate market; Buyers and Sellers need to better understand the process so they can work together through escrow in a proactive manner that will conclude in the original goal…. sale of a property.