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Home » Blog » Future of Real Estate » Conversations with Krisstina » Have you experienced the Home Valuation Code of Conduct (Middle-man Appraisal Mgt Companies) to help or hurt the housing crisis?

Have you experienced the Home Valuation Code of Conduct (Middle-man Appraisal Mgt Companies) to help or hurt the housing crisis?

by Goodlife on June 29, 2009

I posted this question yesterday on Facebook and Twitter. I was amazed at the number of responses I received to my question during the span of only a couple of minutes. Instantly Realtors®, homeowners, appraisers and lenders began to share their real stories, opinions and outrage at the new rules (many in 140 characters or less!).  Although I have read several articles of late reporting and speculating about the new legislation, what I have not seen, prior to my Facebook post, are real stories of how people are being affected due to this, in my opinion, ridiculous regulation. Therefore, because of the many real stories appearing on my Facebook Wall, as a result of simply posing what I thought a benign question , I thought I would produce a ‘space’ for all to share their stories as to how this new legislation is affecting the already suffering real estate industry fighting for a market recovery. UPDATE 6/30: We managed to get local TV coverage of this important issue affecting home buyers and sellers.  To view the coverage, see KVUE’s webcast of the story. What is the Home Valuation Code of Conduct (HVCC)?  HVCC is a new rule put into effect by Fannie Mae and Freddie Mac on May 1 that prohibits lenders from ordering appraisals directly from the appraiser. All appraisals now must be ordered using third-party appraisal management companies. Can you say ‘middle man’? So, why such a bad idea? Many of these appraisers are not even local which means they know little to nothing of the local markets, don’t have access to MLS and certainly are not able to identify value based on the idiosyncrasies of different neighborhoods. This means they tend to deliver flawed valuations that cause transactions to fall apart. In addition, the new rule has spiked the cost of an appraisal to the consumer -the middle man management company needs their share of the fee for assigning an appraiser to a property — and has significantly increased mortgage processing time. While these factual impacts illustrate the negative impact HVCC is having on our market, nothing tells the story as well as real stories from homeowners, Realtors®, Lenders and Appraisers. If you, your client or your business has been negatively impacted by HVCC, please post your story. I will add mine in the mix as well. Thank you, Krisstina UPDATE 08/19: The latest news coverage on the HVCC and the appraisal management company takes an insightful look at what led to the code and it’s impact on the economy: http://www.nytimes.com/2009/08/19/business/19appraise.html UPDATE 07/24: HVCC Clarification from Fannie Mae and Freddie Mac: http://varbuzz.com/hvcc-clarification-from-fannie-and-freddie/ UPDATE 07/10: ***Potentially $1.7 Trillion in equity has been lost due to HVCC.*** Check out the latest video from Think Big Work Small http://www.thinkbigworksmall.com/mypage/player/tbws/11895/1029714 and SIGN THE PETITION at http://hvccpetition.com. UPDATE 07/01: The guys at Think Big Work Small launched a petition for the reconsideration of HVCC. Check out their video, discussion and petition at http://www.thinkbigworksmall.com/mypage/player/tbws/10777/1029714 UPDATE 07/01: The President of the National Association of Realtors (NAR) emailed all Realtors to express NAR’s concerns and the steps they are taking to resolve the problems that have been created by HVCC. On June 29th, the President traveled to New York and on the 30th he traveled to DC. We will keep you posted on the results of his efforts. In addition, NAR VP & Liaison to Committees Steve Brown shared his experiences with HVCC in his recent blog: http://narblog1.realtors.org/mvtype/president/2009/06/all_is_not_quiet_on_the_midwes.html UPDATE 07/01: There is a bill on the table asking for an 18 month moratorium on the HVCC. Read and then write your congressman: http://www.mortgageorb.com/e107_plugins/content/content.php?content.3794

{ 28 comments… read them below or add one }

Allan Armishaw June 29, 2009 at 12:10 pm

Recent legislation requiring a third party to order appraisals instead of a lender/broker is causing serious havoc…I had a Dallas realtor tell me that his client had to cut sales price from $ 229k to $ 215k at the last minute because buyer’s lender was required to order appraisal according to this new process…he vented his frustration ..his client was stuck …he was required to close on a $ 600k new home with no way out..he felt like his pocket just got picked to the tune of $ 14k ….It seems to me that our “Founding Fathers” somewhere along the line have been replaced by ” Floundering Fathers “


J Lee Adams June 29, 2009 at 2:53 pm

I am an active appraiser in Austin, Texas and have witnessed myriad negative effects and unintended outcomes with the implementation of HVCC. As intended HVCC should protect the loan borrower (consumer) however the outcome has, to date, proven to be anything but a protective measure. Most of this is the result of third party Appraisal Management Companies (AMCs) that has little or no vested interest in seeing the logistical process of lending through once they have collected their fees. While some AMCs are credible many rely on the shoddy and inconsistent work of appraisers willing to work at 30% to 65% of their normal rates. Loans officers are often shell shocked by the poor quality of the appraisals they receive. The AMC is the arbiter in this situation; unfortunately, they are often so busy and unfamiliar with the file that they don’t know how to effectively communicate with the appraisal vendor to ask a question or communicate the bank reviewers questions. Meanwhile the borrower is watching the remaining days of their interest rate lock tick down to zero. Borrowers have called me (the appraiser) to find out why their loan officer is not returning their calls or why the AMC has not responded to the loan officer.

As it has been with the AMCs, the left hand as often is not aware of what the right hand is doing. Recently, I was contacted by an AMC and asked to examine the floorplan sketch on an old appraisal and comment why the air-conditioned space I measured was so much less. They were upset and needed an immediate response. Upon opening the floorplan sketch, I saw that the property they were referencing was in North Carolina while the property I appraised was in Texas. The AMC later admitted to the clerical error and said simply, “there is way too much going on right now.” Scary stuff.

Lastly, I would like to comment on the sad phenomenon that occurs when the consumer decides they don’t want to work with the original mortgage company due to broken promises, incompetence, etc). Prior to HVCC, I would receive a request to transfer the existing appraisal to a new mortgage company. No longer, now the consumer has to shell out for a whole new appraisal because the original appraisal is not “portable.” For people, they don’t have that much money to spend on a new appraisal.


Grant Gold June 30, 2009 at 7:57 am

Yesterday my good friend became the latest victim of the new legislation requiring a third party to order appraisals instead of brokers/lenders. My good friend calls me yesterday to say that his appraisal came in at 160K when he is currently under contract for 175K! This home appraised at $160,500 in April of 2007 when he purchased it.

He called me to vent and to say, “Please Help.” I spoke on the phone with him and his wife last night for about 2 hours. We spoke about solutions-how can we could somehow save this deal with saving as much money as possible?

One of the most frustrating things in this now unfortunate situation is that the appraiser is from Georgetown, TX, about an hour North of San Marcos where the home is being sold. Georgetown is a much different real estate market than San Marcos.

We all think it would make more sense to use a San Marcos appraiser, but I guess common sense it out the window in this case. Both buyer and seller are currently unhappy and both will have to make concessions if this deal is to go through. Once a win-win situation has now become a lose-lose.


Allan Armishaw June 30, 2009 at 2:28 pm

Note to reader – appraiser signed his name to a value of $ 540k but told client verbally that it was worth $ 675K to $ 725k

Actual email from a client in Austin

Just a quick question….

We had our appraisal yesterday and I have no earthly idea where he came up with a figure of $540K. The square footage on the house is some 500 sqft less than our last appraisal. He has our house $100K+ less than a smaller house, small lot, no pool, no basketball court, etc. house in the same neighborhood. He told Shannon that he was going to use a lower figure so that the “banks” wouldn’t raise an eyebrow to the refinancing.

Now, you are advising us to get our tax assessment lowered from $680K to $505K? We paid $640K for the house; put in about $100K in amenities and based on the current advise we are taking a $235K loss to net worth on the house? I know the housing market is tough but a 20% decline?

I am just a bit confused. As much as I would like to reduce my mortgage payments the thought of having lost $230K in two years seems to wash off the benefits of $300/month.

Follow up email

Shannon just talked to the appraiser and he said that he kept the figure low based on wanting to not raise red flags. He said the house, if it was for sale, would appraise at $675K-$725K. That is much better than the documentation provided.

Still not sure why we have such wild swings in value; but I can assume that this is done to grease the wheels.


Christina Haas June 30, 2009 at 3:31 pm

Proceeding through a re-fi, our assigned appraiser was not familiar with our market. I believe he said he was from Buda; we live in North-Central Austin. With a complete remodel, added square footage, sustainable/energy efficient features throughout and a newly landscaped, oversized, creekside lot, we hoped for an appraisal at least $15 – $25K higher than we received. This would not have been unrealistic based on other local home values over the past 6 months.

During the appraisal visit, the gentleman admitted he would only be using the current price/sq ft comps since the new laws made him timid about crediting anything too “outside-of-the-box”. We were surprised when the appraisal came in at the exact amount the home across the street sold for last year. That home being on an average-sized lot with only cosmetic updates.

With interest rates rising and the re-fi process taking much longer than before, we have to choose between:
1) accepting the assigned value in order to keep our original, lower rate lock.
2) requesting a new appraisal, gambling that we might receive a truer valuation but knowing either way interest rates will now be noticeably higher than when we started this process.


Pash June 30, 2009 at 3:56 pm

I’m a mtg broker in Austin. So far, each and every AMC appraisal has been a complete nightmare.

The first one, even though the house is valued at $$455k on TCAD, the appraisal came in at $402k. I submitted an appeal request, but it was denied because I didn’t include any comments. I resubmitted a 2nd appeal request, and this time the appraiser wouldn’t review the appeal because I’d done some math in my comments, and came to the conclusion that by using the more appropriate comps I’d found the price/sq footage to be higher. So I deleted that verbiage, and resubmitted the appeal request AGAIN. Meanwhile, rates went up by a full point, making the refi a moot point, but I still wanted to fight the valuation in case rates came down. Now my lender is requiring a full file, and my client is so disgusted, that he won’t even call me back. He wasted $450, I wasted countless hours calling the builder to get comps to fight this, because apparently now I also have to be an appraiser.

This is one loan.

I have a 2nd loan where the AMC’s charged my client TWICE, and they are refusing to credit him.

The pictures on one of the appraisals is completely dark, and impossible to see because he took the pictures at night.

On another deal, we’ve been waiting for over TWO WEEKS for the appraisal. They can’t seem to find an appraiser to do it.

I could go on and on. Every single deal has turned into a complete nightmare.

I used to send a fax, and 3 days later I’d get a perfect appraisal. Now we’re all stuck in this unbelievable amount of incompetent minutia.

This hasn’t even gotten one minute of attention on the news. This is driving home prices down, and negatively affecting the housing market at the worst time.

Bottomline, HVCC does not work, and we must fight to revoke it immediately.

I haven’t even gone into the fact that it put my appraiser out of business overnight. He has a wife, and 3 kids, and now he has no way to support his family. He refuses to sign up with an AMC because they will steal half his income. I have no idea what he’s going to do to survive.

There is more legislation on the way to push brokers out of business as well.

All this is supposedly to “protect” consumers, as a result of the economic disaster as a result of the sub-prime mortgage collapse. Meanwhile, nothing has been done about the DERIVATIVES, which are the true cause of the global economic disaster we are in.

Once again, HVCC does not work, and must be repealed immediately.


Kristin Carroll June 30, 2009 at 5:28 pm

I am an accomplished Mortgage Banker in Austin. I have heard horror stories since the implementation of the HVCC regualtion on May 1st. from many Realtors. I am happy to report however that my company, Sente Mortgage (locally owned and operated) designed a solution that helps our clients avoid the breakdowns mentioned in the blogs above. We have 8 highly competent and accomplished LOCAL appraisers that we use on a rotation basis. This allows us to get quicker appraisals from knowledgeable professionals who know this marketplace. No breakdowns for me so far!


Christina Haas July 1, 2009 at 6:00 am

Caught your KVUE interview last night, Krisstina. Great job!!


Susan Espinoza July 1, 2009 at 6:00 am

We are more victims of this ridiculous new law. We recently initiated a refinance of our home to reduce our rate and take cash out for improvements. We did something similar two years ago, so we based our request on the value of the appraisal done at that time, never dreaming there would be any issue. The appraisal this time came in over a HUNDRED THOUSAND dollars less than just two years ago. Adding insult to injury, we invested $70K in renovations after the last appraisal, so according to this new valuation we gained nothing for those improvements. I am completely fed up and frustrated and have decided to scrap the whole refinance/remodel plan for the time being. This law does not appear to be helping anyone, except perhaps the appraisers who get paid for substandard work.


Allan Armishaw July 1, 2009 at 1:52 pm

Debacle du jour !!

Note to reader – appraisal actually came in $15k above contracted sales price …client still felt cheated … builder spoon fed appraiser

What ever happened to accountability to the person paying the bill ?

Actual email from a client in Austin

BTW I came to know that our appraiser never entered the house, never got the key. This person got all the stats and data from the builder.

This 3rd party independant appraisal is not truly working as it should, is it ? Add they have the courage to ask for a higher fee. How unfair and weak the system is.


Krisstina Wise July 1, 2009 at 3:26 pm

Today, as a result of being featured on the local news regarding this issue, I received several emails and phone calls from people affected by the HVCC code. One appraiser let me know that he has been in business for 20 years, has made a good living by being an ethical appraiser in good demand by local mortgage brokers. As a result of HVCC, his income has dropped by over 50%. He no longer can get business from the brokers he has served for years and the business he receives from the AMC (appraisal management companies) only pays pennies on the dollar (they have to keep their part of the appraisal fee for their hard work of assigning the appraiser).

In addition, the code has been revised to allow banks to create their own AMC as new profit centers. Wells Fargo, B of A and Chase Banks all put pressure on Washington to enable them to own their own AMC (banks owning AMC were prohibited in the early drafts of the regulation) in order to increase their bottom lines. Not sure how this helps the public — you?


Wayne Kress July 2, 2009 at 11:33 am

From California, the fight is on!

HR 3044 to place 18-month moratorium on HVCC:
California Congressman Gary Miller has introduced H.R. 3044, which would place an 18-month moratorium on the recently imposed Home Valuation Code of Conduct (HVCC). The HVCC was worked out through an agreement between Fannie Mae, Freddie Mac, and the New York Attorney General’s Office (NYAG) in response to an investigation by the NYAG into Fannie and Freddie.

The purpose of the HVCC was to try and insulate the appraisal process from undue influences. The HVCC attempted to do this by placing tight controls and restrictions on the ordering of the appraiser, as well as purposes for communicating with the appraiser during the process. However, the implementation of the HVCC, which came about by neither regulation nor Congressional statute, has resulted in appraisals that cost more, take longer to perform, and are inaccurate. C.A.R. has heard from members throughout the state of similar difficulties with the HVCC and its negative impact on the California real estate transaction. C.A.R. is supporting H.R. 3044, and is asking California’s Congressional Delegation to sign onto the bill as a cosponsor.


Joe Buell July 2, 2009 at 11:52 am

At this stage, you are correct in regards to the larger, national banks and their relationships with AMC’s. The HVCC has really hurt the appraisers and the business relationships they have established over the years.

There is an option available to your local lenders that will give them the ability of controlling who does the appraisal for them, and also keeps the fees where they should be. This option is in full compliance of the HVCC. It is not an option for everyone, but may help some of your local lenders.

In short, if the lender is a Mortgage Broker, they will not be able to use this option. They are required to order appraisals through an HVCC webportal approved by their lenders. This usually means that they have to order through the AMC’s you refer to below. (Mortgage bankers who are selling the loan to one of the larger AMC’s, even though they are financing it themselves at closing, may be told that they have to use their AMC as well.)

Mortgage Bankers (those who close the loan in their name and then sell the mortgage) and local/regional lenders have been using this system (Mercury Network) with much satisfaction. If you would like more information on Mercury, just let me know. Again, it isn’t a solution for everyone, but does work well for Mortgage bankers and local/regional banks.



Jack Miller July 2, 2009 at 12:07 pm

While in conversation with a friend, the comment came up that this was really just a “market correction”, and that the problem with the real estate bubble was appraisers allowing inflated appraisals in CA and elsewhere.

Krisstina, what is your perspective on this?


Joe Buell July 2, 2009 at 12:08 pm

Happy 4th of July! I wanted to send you a quick email in regards to the article on KVUE website where you commented…”In the past, lenders would
call on known appraisers with experience in the particular real estate market in question. They must now call a third party appraisal management
company.”. This is not 100% accurate. Please note that if the lender is a bank or a mortgage banker, there are options on ordering appraisals that will still give them control over who the appraiser is, while being compliant with the HVCC. If it is mortgage brokers with no line of credit,then their hands are tied.

I would be happy to explain this in more detail if you are interested.


Krisstina Wise July 2, 2009 at 6:03 pm

Joe – Thanks for your feedback. I agree with you and am aware that some mortgage companies own their own AMC enabling them to have some control over who the appraiser is – but that doesn’t change the problem and painful situation that the industry and public is experiencing as a result of the HVCC legislation.

1. A majority of the mortgage companies do not/cannot have some level of relationship with their trusted and competent appraisers — which is a reason for the large numbers of low appraisals that continue to damage an already suffering housing market
2. The large mortgage companies (Wells, Chase, B of A) influenced the Powers that Be which caused the regulation to be re-written to enable them
to own their own AMC and as a result, many knowledgeable appraisers have lost business to these new AMC and are going out of business. The Big 3 lobbied their way to unfair advantages that are costing great appraisers their careers. In addition, these AMC are now a profit center to these banks with the additional cost being charged as higher prices of an appraisal to
the borrower.
3. The AMC appraisers are scared to death to appraise homes at market value (a price agreed to by the buyer and seller) because in the case that
the buyer defaults, the appraiser is subject to liability. Appraisers today are more concerned with CYA than true market value reflecting today’s market conditions.
4. The cost of appraisals to the consumers has increased by up to 40% so that the AMC can collect a nice fee for selecting an appraiser.
5. Appraisers are now required to fill out more government paperwork that is mostly duplicate information and data (more cost and
inefficiencies). Although they are required to do more – they are earning 50-60% less for the job than prior to the HVCC legislation.
6. Home sellers, most of whom have lost equity and suffered the consequences of a market correction are now having to fight appraisals or
lower the price of their home many times 10%+ lower because of the biased CYA appraisals.
7. I could go on … ;)


Allan Armishaw July 6, 2009 at 8:30 am

Recipe for Disaster?

Are lower housing prices ”baked in the cake”?

If our ”Floundering Fathers” wanted to make certain that housing prices continue to fall at an ever increasing rate, then job well done.

On the other hand, If you are sensitive to the fact that there are real people out there that are stuggling to stay in their homes …feed and clothe their families … preserve or improve their net worth … then, I would say ”It was like puting out a fire with gasoline”

Every time that a home price has to be adjusted downward due to HVCC … guess what happens to the next transaction that occurs in the neighborhood …today’s bad appraisal results in tomorrow’s bad ”Comparable property” which will be used for the appraisal of the next victim in line.

Resulting impact is a virtual guarantee that housing prices are in lock-step going lower … with no way out due to this systemic flaw.

What thinking person would not have seen this coming?


Barb Torres July 6, 2009 at 12:18 pm

Out-of-area appraisers are VIOLATING appraisal standards and therefore violating the HVCC when they take an appraisal assignment that is not in
their own market area.

The HVCC requires licensed or certified appraisers, and they are required to comply with the Uniform Standards of Appraisal Practice (USPAP). Those standards ABSOLUTELY PROHIBIT an appraiser from going out of the area -
unless they disclose in the report what steps they took to familiarize themselves with the new market. Such as working with a local real estate
agent, a local appraiser or other local professionals; obtaining info from the local MLS, etc.

AMC appraisers are not doing this. Either the AMCs don’t know about this or don’t care! Thus, the AMCs are also violating the HVCC (and should be put out of business)!

The lender ends up with an appraisal that does NOT COMPLY with the HVCC.

THE SOLUTION: As soon as an out-of-area appraiser shows up to do the inspection, the buyer, the seller, the listing agent, the selling agent, the
loan broker – everyone! – should contact the lender immediately. Preferably in writing as well as via phone. They have a right and an ethical obligation to DEMAND that a local appraiser be used – or else the appraisal
VIOLATES THE HVCC, and the parties have participated in that illegal process!


Krisstina Wise July 6, 2009 at 3:43 pm

We can’t talk with (directly influence) the appraiser – but we can justify our price by lending them our comparable data.



Lynn Grimes July 6, 2009 at 3:44 pm


Lending them by having a packet of our comps, information on the house and condition? That is a great idea. What else can we do to help fight this?



Lynn Grimes July 6, 2009 at 3:44 pm


Good report on KVUE! Thanks for sharing. Didn’t quite understand how you are going to document your comps and write a story on the home. Thought there was no contact between agent and appraiser? Am I wrong?



Doug Francis July 8, 2009 at 7:40 pm

This part of the buying/sales process is now the ultimate “X-factor”. Properties that I did not think would appraise… appraised. While a great deal one buyer client made came in $10k less… say what?

Nothing like a little extra excitement in your day!


Dan Grimmett July 15, 2009 at 1:53 pm

Here are a few HVCC Myths vs. Facts…

Myth: HVCC prohibits Realtors and lenders from talking to appraisers.
Fact: Realtors and lenders can talk to appraisers, including requests to consider additional data or to correct errors.

Myth: A lender is required to use an appraisal management company (AMC) to get an appraisal.
Fact: Lenders may directly retain the services of an independent appraiser.

Myth: Lenders are required to choose appraisers from a rotating roster approved by Fannie Mae or Freddie Mac.
Fact: Lenders may choose to use a rotating roster of appraisers but are NOT required to do so by Fannie Mae or Freddie Mac.

Myth: The code applies to all mortgages that require an appraisal.
Fact: The code applies only to 1-4 single family loans sold by Fannie Mae or Freddie Mac and does not apply to FHA, VA or the Federal Home Loan Banks.

Myth: HVCC requires an appraisal where a lender was previously under no requirement to obtain one.
Fact: Nothing in the HVCC requires a lender to obtain a property valuation or to use a particular methodology.

Myth: A mortgage broker may select the appraiser.
Fact: If the lender grants permission, a mortgage broker may directly contact a lender-approved AMC that retains the appraiser.

Myth: A mortgage broker may not transfer an appraisal from one lender to another.
Fact: A mortgage broker may transfer an appraisal if the lender who ordered the original appraisal grants permission.

Myth: Borrowers must use a credit card upfront to pay for an appraisal.
Fact: A borrower is not required to pay for an appraisal with any one particular form of payment.

Myth: A borrower may pay the appraiser directly.
Fact: Payment for an appraisal must be made to the lender or third-party hired by the lender to retain the appraisal services.


Paula Brown July 15, 2009 at 2:02 pm

Here is what I have seen in my daily working on the lender side.

The AMC’s are not allowing any contact, all contact is required through the dispute forms. IF the appraiser WANTS to call the realtors, then it is SOLELY up to the appraiser. The AMC TOTALLY shields the appraiser if the appraiser wants the shield. Some appraisers take the shield and some don’t. If we as the LO or the agents call the appraiser then he can kill our deal claiming interference or influence.

Lenders are not required to use an AMC, however over 80% of the lenders have formed an AMC in order to generate the income. It was way too easy not to. There is no regulation of them and there was no supervision or licensing established. The lenders that allow you to order the appraisal through a HVCC compliant appraiser have such horrible rates and underwriting times that you wouldn’t use them anyway.

I have not seen or heard of a lender that has accepted an appraisal being transferred. Their concern is that we will have an “influenced” appraisal that we are transferring and they want to insure that their appraisers who are protecting their interests do a new appraisal. It also produces new income for their AMC.

All AMC’s are requiring payment in full upfront before the appraisal will be done. Payment by credit card is not required, you can mail a check, but it will delay the appraisal. Credit card is just faster.

From the Loan Officer side I now have to decide where I am going to send the loan at the very beginning of the process, and then we are stuck there. Before I could watch rates while we were getting the appraisal and “shop” rates and if rates dropped drastically then I could always pull the loan from a lender and send it to a different lender that had drastically dropped the rates. Our client then benefitted hugely. Now, the Buyer would not be able to benefit from a rate drop because you would have to get a new appraisal which would mean the contract would have to be extended, etc…. The other HUGE difference is that the AMC turnaround on appraisals is taking two to three times longer than before the HVCC.


Greg Cunningham July 16, 2009 at 7:28 am

First, you need to know what the word “Lender” refers to. It will be the actual lending institution, not your local mortgage broker. i.e. Brokers are just that, middle men for a lender to get the loan process going. Also to do the leg work, processing etc.

Mortgage brokers use to be able to order conventional appraisals directly from me. They still can to a point. As long as I’m approved with that lender and they okay it, the broker can request an appraisal from me. One broker I work with recently ran a deal in Cedar Park through a lender out of Atlanta called Primary Capital and I was not on their list yet, so the broker got some idiot that produced a really ugly report. The good news is, for some reason it went through underwriting and the deal closed. Go figure. Their AMC actually paid the guy about 85% of the fee collected which is almost acceptable.

Note that lenders do not have to use an AMC, it’s just a good excuse for a profit center. That’s the main deal behind Well Fargo (RELS Valuation), BoA and Chase.

It’s like this. Wells Fargo use to have an appraisal review dept. within their company. They had to pay somebody to oversee the appraisal ordering and review processes. With an AMC, they shifted those guys out of the Wells Company which cut that payroll out and into the AMC they created where they can legally (or illegally I think) pay the same people with half of the appraisal fee and not violate RESPA. Because RESPA says that if you collect a fee for anything including “runners”, “delivery services”, appraisal, etc, 100% of that fee must be paid to that vendor. What Wells did was set up RELS Valuation as the “Appraiser” (A little loophole in the law) and then they subcontract the work from their offices in Minnesota and Aurora, Colorado to the actual guy on the ground and pay them 55% of the fee collected. BoA and Chase jumped on board as well. The bad part about this is that they are obviously three of the major lenders in the U.S. and I use to have a great working relationship with several of their local offices which I had groomed for years. All of a sudden, the guys I knew at the local level could no longer order appraisals from my company.

As far as paying the appraiser, we use to collect a check at the door from time to time (although I think that was wrong too. That undue influence thing. It’s real hard to take a $400 check from someone and then kill the deal, if you know what I mean). Anyway, all payments now have to come from the actual lender and not a mortgage broker or borrower.


Krisstina Wise July 24, 2009 at 3:07 pm

Many Realtors and homeowners have asked me of late what they can do to help fight this HVCC appraisal debacle. I mentioned this on my news interview, but for those that didn’t watch the interview, I will give my advice here as well.

Because AMCs are most often choosing appraisers based on two criteria: low price and quick completion time — this often turns into superficial assessment of comparable stats and data. This has produced an increase in reported out-of-area appraisers, inexperienced appraisers and a decrease in appraisal quality.
Sure, this isn’t supposed to be the case — but regardless of what is ’supposed’ to happen — what ‘really’ is happening is devastating to buyers, sellers and competent appraisers alike.

So what can we do?

The good news is that the HVCC does not prohibit the real estate broker or agent from talking with the appraiser. The broker/agent can take steps to assess the competency of the appraiser. As I mentioned in my TV interview, we at The GoodLife Team, when working with a new lender, interview the appraiser before he/she conducts the appraisal. We inquire their level of experience, the knowledge of the specific area, their home/office location, do they have access to the local MLS, etc. In addition, as allowed, we provide market information and comparable data we used to validate the sales price producing a bona fide contract from a buyer happy to pay the price based on established comps of the home. In the analysis, we note any homes that are not comparable due to condition, those that are bank-owned properties, etc. We leave our analysis for the appraiser.

This requires additional work on our part, but it is the only way we know how to take some control back into our own hands in order to protect our buyers and sellers from bad legislation. No one wins from a low appraisal coming from an inexperienced out-of-area appraiser.


Allan Armishaw August 10, 2009 at 1:43 pm

This is an actual on-line update from an appraiser employed via this process

Note From Vendor: Comment: 8/10/09

“This is a property with two detached single family residences on one single lot.

Please advise. It was inspected today. ”

My comment

Now I know why brokers are not allowed to have any contact with appraisers under this process.


Doug Stewart October 2, 2009 at 4:12 pm

Not only have I heard of the difficulties of appraisal rules but I was also informed by a good business peer associate friend who specializes in commercial real estate that there is very little to no lending available in the commercial real estate market and that a high number of commercial foreclosures are on the horizen which will trigger a major meltdown. This will increase the overall lack of consumer confidence especially with the announcement today, gulp, by the president, that over 400,000 jobs were lost in June but (the ” good news”) is that the job loss numbers seem to be “slowing down”, which would seem to suggest that-maybe I’ll lose my job, maybe I won’t! This would appear to contradict the “hopeful” message that was projected during the campaign and to reiterate that we have not hit bottom yet.


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