NAR's website has a page with much information on HVCC: http://tinyurl.com/krssfg
There is much to read on that page should you want to but you might want to first take a look at the link "NAR's HVCC Myths and Facts Flyer."
The "Myth" is that HVCC rules prohibit lenders and Realtors from talking to an appraisars when, in fact, it states under "Facts" that: "REALTORSÂ® and lenders can talk to appraisers, including requests to consider additional data or to correct errors."
Thus, I will continue to do what I have always done for many years. That is -- to be at my listings when an appraisal is taking place. If I have additional honest, truthful & factual information to provide the appraiser I will do so. Whether or not the appraiser makes use of this will, of course, be up to the appraiser.
There is nothing "illegal" about a Real Estate Broker/Agent providing Comparables to an Appraiser, in fact, in a recent article from the National Association of Realtors they supported the practice due to issues that have been created by the HVCC which has had a negative effect on many sales, etc.
In most suburban neighborhoods, this practice is usually not required; however, in many urban intown Atlanta neighborhoods that have been ravaged by foreclosures, short sales, etc. a LOT of sales information is not readily available in the MLS. In fact, greater due diligence must be performed to find Bank Sales, HUD Sales and other transactions that can only be found in tax records, etc.
If someone was providing "False" Comparables, then by all means they should suffer consequences from their actions; however, if the Listing Agent was merely providing Comparables that could be verfied through tax records the Agent is simply doing their job to make sure the Appraiser if doing theirs. If you wait to argue after the fact, the deal may too far gone to pull back together.
Refinance deals do not typically give the appraiser the target. Guess how often they come out low? But when the homeowner is present, and they will usually be, and they engage the appraiser in what they are trying to accomplish, and what they may have done to the home, then the appraisers job is again to determine if the collateral is sufficient. There are numerous ways to do this. But yes, appraisers work best when they have a target, then they can say this particular property does or does not fall within the target parameters.
Also, as a buyer if I found out a realtor ( mine or the sellers) tried to do anything that could affect what the property appraised at (up or down) why would that not be seen as a conflict of interest? How can a buyer trust an appraisal when those involved are all trying to stack the deck one way or another?
Then finally, if I am looking to buy not in a big city with many sales but a small town of 500 or less with no recent sales how is an appraisal made with no comps?
It sounds like doing, or getting an appraisal is a lot more complicated than people would think. What a question and response section to have found.
In relation to Bee's question, I don't think meeting the appraiser at the house with comps is a good practice, but I have had appraisers call me while doing an appraisal to ask for prices on pending transactions or closed sales in neighborhoods where I am considered na expert. I am not even sure under HVCC guidelines that this is a valid practice.
All I can say in relation to all the questions presented in this post is that the HVCC was the worst thing that has even happened to Real Estate and it has not stopped what it was intended to stop and has only created more problems. Let us hope they dump it before they completely trash our industry.
The real purpose of an appraiser is to verify that the property is sufficient collateral for the loan. It is not, and actually cannot be, a specific price determination of a property. I have several appraiser stories, they all point to the same thing. It would, in my opinion, be more valuable to have supporting documentation that answers the question specifically -- Is this property sufficient collateral for the pending loan?
I had one contract for $119,000 home. The appraiser, in his wisdom, determined the actual value of the home was $117,800. That's baloney. This particular appraiser was actually an apprentice. It worked out good for my client, because the seller reduced the price $1200. But I know for certain another appraiser would have come up with a different answer, and I know for certain that no appraiser can come up with a pinpoint valuation of any property. A range, maybe, not a determination that is supposed to be gospel somehow.
I personally do not have any problem with a seller or buyer's agent providing comps to be considered at time of the inspection. There is however a fine line between providing additional data for consideration and influencing the outcome, which should be recoginized when meeting with the appraiser. Even before the HVCC, appraisers could not, and/or should not, discuss the appraisal with anyone other than the client who ordered the appraisal (USPAP regulations). Now that is not to say an appraiser cannot discuss the appraisal process and/or method(s), just not the specifics of a particular appraisal.
Others have provided some interesting views and comments. Some of which I agree with and some which I disagree with. They do however show a lack of understanding of the appraisal process and all that is involved and/or required. For example: Edward's comment concerning the contract price. The appraiser is REQUIRED to review the contract and INCLUDE specific information in the appraisal report taken DIRECTLY FROM the contract. One of which is the contract price.
Another misconception, or lack of understanding, is the fact that appraisers do not "kill deals". The market dictates value. The appraiser interprets the data in order to report the value reflected in what the market dictates to the client. That value has to be presented in a numeric form, and can be expressed as either a specific value, OR as a value range. Also for mortgage purposes, the appraisal does not determine value. It's purpose is to ASSIST the lender in determining the collateral risk involved with the transaction. When a deal is "killed", it is usually because there is not suficient legitimate data to support the sale price, or in many cases an inflated sale price.
You bring up a good and valid point - and it illustrates a common theme. The bottom line is that no two appraisers are going to look at something the same way - you do expect however for them to be somewhat close. Purchase transactions theoretically reflect current market attitudes; closed comps reflect past attitudes. When handed a valid contract, I always place a high degree of respect on the agreed upon price; provided it's arm's length and valid. That said, of course it has be supported by the data - if not it's encumbant upon the appraiser to solicit agent feedback and make the final call.
Your first appraiser seems to have recognized the unit was purchased at a good price and likely tried to keep it near the supposed price - remember automated underwritiing issues in the new HVCC era. The second appraiser had a higher first impression based upon the contract and he apparently felt it was also a good buy.
Whether or not appraisers will admit it, the contract price does set a mark in our minds. At the end of the day the value is either there or not, but the sale price at least gives us an idea of the buyer's mindset.
This home saw a $32,000 increase in value in just two weeks. Both appraisers were local, knew the local market. Both experienced in their field.
However I would like to ask:
"Are you better at recovering from a train wreck or preventing one?"
If your Atlanta listing is being appraised by someone who works 200 miles away, what are your options?
Appraisers are required to review contracts as part of their due diligence. They are required to review the data and prepare the new 1004 MC form that summerizes the YTD trends. They are required to provide at least three closed comps and typically listing and/or pending comps. Many lenders expect additional things and appraisers often add data as well.
Reviewing the contract and knowing the terms, do you think an appraiser wants to "kill a deal"? Do you think they even care? I submit most appraisers just want the report in and out - no call backs. However, if the value isn't supported by the data, what is the appraiser to do? Unless the agents provide confirmable and useable data free from opinion, it's worthless.
As I said earlier, the industry is changing for the worse; experienced appraisers are leaving and the gov't micromanagement is crazy. Appraisers are essentially defeated.....now most appraise to the underwriting programs as they've been reduced to form fillers. This is hurting the recovery in my opinion as we can't come out of the hole if we're unable to offer some level of opinion.
As an appraiser with 20 years experience I'd suggest keeping it simple. Prep an info packet ahead of time, leave it at the house labled "for appraiser" and leave things alone. If you think they "killed the deal" then perhaps the value is unsupported. If you feel strongly then call the lender, submit your info and ask for a reconsideration.
Get the data in the appraiser's hands but do it tactfully, we're not really interested in "agent speak" - the data speaks the loudest.
The idea of appraisers getting paid less (fees go the those management firms) was supposed to be offset by appraisers staying local and being able to increase volume and efficiency. Problem is, many appraisers are walking away and management firms are giving work to the low bidders. Oh, to keep costs low those low bidders are not getting all the usual data sources....so you have less experienced appraisers with fewer reliable data sources. You might get away with it locally, but not if you have appraisers coming across the state. But, that's not supposed to happen according to Cuomo....
There have been similar discussions on all of this -
In a situation like David's there is validity to agents getting involved, if the appraiser isn't from the area then your input may be beneficial but each case is unique. Scott, we've had this discussion before about the Atlanta area - appraisers from Marietta or Canton can easily complete in town work just as appraisers from Inman Park or Cabbagetown can complete work OTP. We have access to the same data - including public records for transactions outside of the FMLS/MLS. Stats are easily pulled for the 1004MC form and the idea of "you have to live ITP/OTP to do work in that area" doesn't hold water. Appraisals are based upon historical data (sales) and trends are forecasted from that, not PR. Savannah to Blue Ridge....Macon to Canton...Cartersville to Athens....that's just irresponsible for an appraiser to accept that work.
It's all about the data.
Most agents don't provide anything earthshattering anyway and I also view any agent that meddles as having an agenda. If the home is worth it, we know.
With the enactment of House Value Code of Conduct (HVCC), the appraisal rules have changed the playing field. If I look at it from the perspective of selling my own home, as the Listing Agent I would absolutely meet the Appraiser to review the Comps they are using to determine the value of my home. In some cases, I will even take the lockbox off the door so they have to call me to get into the home. With that being said, I would do this for every one of my clients.
The purpose of the HVCC is to help curb inflated appraisals and mortgage fraud. So on the surface, I am completely on board with this Code; however, there have been some repercussions that have afftected the process. The fees paid to appraisers are now lower and therefore breed less experienced appraisers who may spend less time on accurate and thorough appraisals. A bigger concern is that quite often appraisers are not familiar with a specific area of town and therefore may not have all the information they need to make an accurate judgment of the value of a specific home. I would expect a Listing Agent to be an "Expert" in the area they take a Listing and therefore have the most complete and accurate information which they can share with the Appraiser to make sure they can make the best informed valuation.
I think this is a good practice for a Listing Agent.
I don't know if you have had the experiences that myself and many other agents in the area have had with appraisers that do not know the neighborhoods and have driven all the way in from LaGrange Georgia but if it is THEIR unbiased opinion of an area they are completely unfamiliar with then YES I will certainly try to meet them and give them information that pertains to the property and the immediate area. I have found appraisers that are not used to much other than suburban subdivisions with all houses and lots being close to the same and not wanting to use an extremely comparable property less than 1/2 mile away because it was considered "too far" in an "intown" neighborhood. Please remember that our "intown" neighborhoods such as Druid Hills, Morningside, Decatur, East Atlanta, Grant Park and Ormewood all cover more than a 1/2 mile. What I have found over the last few months is that houses seem to be priced well and agents, sellers and buyers seem to be more understanding that the house will need to appraise and the sales price seems to reflect this "supply and demand" of current market conditions. So....if an appraiser is unfamiliar with the territory then some information provided by someone that knows the area and the interior finishes of each and every house on the comparable list might be useful/helpful to all involved.
As my mom always taught me "When in doubt...don't". If you think it's wrong...it probably is...so don't do it. I like to base my life and my business on that principal.
Good Luck Bee!
Atlanta Real Estate Agent
Keller Williams Realty Consultants â€“ Roswell, Georgia
Tweet Me: http://twitter.com/JodiRSmith
Prudential Georgia Realty
We have had appraisers from Rome and Canton come to "intown" Atlanta to try and do appraisals and welcome some input.
We feel if an agent merely meets to appraiser and hands them a file of comps, then answers questions the appraiser may have, the integrity of the appraisal should not be compromised.
Aleta C. Saunders, Broker
Anna Lee Trinidad
Prudential Gary Greene Realtors
2900 Weslayan, Suite 150
Houston, TX 77027