Appraisal Issues? Go Ahead and Step In!
What’s in store for us this year with appraisals when home values slightly increase due to the shortage in inventory, sellers will know they can get a little more for their home and multiple bids usually hike that price. So, will it appraise? Submit your best and final!
Now don’t get me wrong as I am not admitting to having my own appraisal issues, but I represent buyers, so this is a way to help protect your listings.
Appraisal guidelines are constantly changing. The number of comparable sales, fluctuating values, declining markets, adjustments and other appraisal information is required on all appraisals. Just a couple of years ago, another major change hit the appraisal industry; the HVCC. And it affects all appraisals across greater Chicagoland area. That’s not really big news as the HVCC has been in place for some time.
The HVCC, or Home Valuation Code of Conduct, contains several provisions but the most significant is how lenders order an appraisal. It used to be that a lender could call up an appraiser directly and order an appraisal. No longer. Now, a lender uses an appraisal management company to order an appraisal. The management company will place the appraisal order on the lender’s behalf, receive it then forward to the lender. Lenders aren’t supposed to talk to or otherwise engage an appraiser. Again, not really big news as the HVCC has been in place for some time. What may be news to some agents is that agents do have the ability to talk directly to the appraiser; and it’s important when valuation problems arise.
Say that you received an offer on your client’s Hinsdale home. You accepted the offer but the appraisal came back $25,000 below the agreed upon price. That’s a problem. The buyers will have to come up with the difference, back out of the deal entirely or the seller reduces the sales price. None of that’s good.
But you do get the opportunity to look at the appraisal and notice that the appraiser failed completely to take into account the newly upgraded kitchen and master bathroom with the wrong square footage of the home/land, which would add at least another $25,000 to the value. The lender is typically required to not get involved. Even though an unlicensed individual from mortgage companies can contact an appraiser if there’s an error but most don’t for fear of violating HVCC guidelines.
But as an agent, you can. You can contact the appraiser directly and tell him about the upgrades.mistakes. Or if the appraiser missed a comp that is just down the street that will support the value or you know of a cash sale or private transaction that occurred; you can help too!
You have access to both public records as well as the MLS and provide updated information to an appraiser when values come in low. Don’t be afraid of the HVCC, it applies to lenders, not the real estate agent!