Real Estate Appraisal Insight From the Expert

Real Life HVCC Misery

*I’ve noticed that I’ve been complaining a bit more than ususal.  I appologize for this, but when you write, you tend to write about what you’re riled up about- good or bad.  I promise to make the next post one that will make you smile… enjoy.

I got an order to do an appraisal last month.  It was one of my better clients- one whom I have worked with for over four years.  But since May 1st, they like everyone else have had to work through an Appraisal Management Company (AMC)- someone was buying a home- this was in Glendale, Arizona- a suburb of Phoenix.

As usual, I received a copy of the sales contract so I could analyze the details of the transaction.  This is done so that the Appraiser can see if there are any “sales concessions” within the deal.  Good examples of sales concessions are when the seller pays for a home warranty on behalf of the buyer, or if the seller contributes say 3% of the purchase price towards the buyer’s loan expenses.  So if a home is under contract for$200,000 and the seller is contributing 3% towards closing costs, then the buyer is technically only paying $194,000 even though the contract might show $200,000 and when it records it will show $200,000.  So it is very important to analyze the contract for this reason to determine the “real” purchase price.

The problem with purchase appraisals is that too often, the Appraiser sees the contract price and now has a “target” value that he might shoot for.  This is the subtle version of lender pressure- instead of the loan officer saying “I need the appraisal to come in at over$200k”, they let the contract do the talking.

So I appraise the home and unfortunately, despite the $200,000 contract price, the data of comparables only supported a value of around $180,000.  The whole point of the HVCC is to eliminate lender pressure right? Right?  So they can’t fault me for coming in at the true value right?  Right?

About a week later, I get an email via the AMC saying that the contract has been revised per my Appraisal and now the parties have agreed to a contract price of $180,000.  Sound great doesn’t it?  The email asked me to revise the contract section of the appraisal accordingly (perfectly legal) and the email also says that now the seller will not pay any of the buyer’s closing costs.  I look over the new addendum and sure enough it shows the new contract price and it’s dated and signed by both parties.  Cool.

But uncool is the fact that nowhere on the addendum does it mention that the seller isn’t paying closing costs.  The original contract shows that they are, and if they are not doing so anymore, then the contract needs to clearly state that.  So, I can’t revise the report without that information in writing.

As I mentioned, the email I received detailed what they needed, so I can just reply to that email and tell them that I need more info, but no… the AMC is set up to send these automated mail server “emails” that you can’t reply to.  And of course there’s no actual contact person or real email address or phone number to call. (don’t you hate when you reply to an email with a verbiose and well thought out letter and after you send it, it bounces back with a “ha ha!  fooled you.  this isn’t a person’s email address” message?)

So I log onto the AMC website- it looks very nice and there’s an option to send the lender/client a message- cool.  But then I see that the “messages” are simply radio check buttons.  You get to select one of about 20 canned messages like “borrower no show”, “delay of 24 hours, “no power”, etc.  I figure there must be an “other” selection with a text box but no.  I look for an appropriate canned message and the best available is “please send sales contract”.  That’d work… but I already have the sales contract as far as they are concerned.  I need a page of the contract which they haven’t sent.  How are they supposed to know what I mean?

So, unlike most guys, I give in to asking for directions.  I call the AMC and a very courteous person comes on the phone and he explains that I have to use one of those canned messages in order to comply with HVCC.  I explain to him the situation and the fact that this system will now only creat confusion and delays, and he courteously replies with “we are HVCC compliant, I understand the situation, but that’s how it works.”  There’s no use getting mad at this guy and I’m so used to being mad at situations and policies, that I keep my cool and let out a Charlie Brown sigh.

I next call the lender directly whom I’ve worked with for years.  The processor I know is unable to help me.  Long story short, I eventually called the listing agent who promptly sent me the addendum.  Situation resolved.  When all was said and done, between the time they sent the revised request and when I sent it back to them- 3 hours.  No big deal.

But is it a big deal?  Well, it’s been three weeks since I finished that assignment.  The deal is closed, I’ve been paid, and here’s the funny part- I haven’t received another order from that lender since.  This is the lender I’ve worked with for four years averaging about 6 deals a month.  And you know who I can contact to find out why I haven’t received any orders since?  Neither do I.

If you’d like to share your own story of how the HVCC has affected you, let me know.  And if you feel that the HVCC must be stopped, I ask you to do two things- sign the petition at www.hvccpetition.com and contact your congressman about HR 3044 which would put a moratorium on the HVCC www.govtrack.us/congress/bill.xpd?bill=h111-3044.

Visit our website at www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try www.appraiserdude.com. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.