What’s an HVCC and How does it Affect the Real Estate Market?

Huge thanks to Kris Berg for republishing her brilliant piece on the HVCC (Home Valuation Code of Conduct). I’m not fond of starting the week with non-original content, but all buyers, sellers and Realtors should read this. The HVCC affects everybody – and not necessarily in a good way.

Real estate is local. If the appraiser is not local, in my opinion, they are much more likely to be unable to perform their assignments effectively.

If you were a licensed real estate agent in 2005 (which, according to the most recent census, includes everyone over the age of eighteen except some guy from Des Moines named Carl), you undoubtedly understand the need for a code of conduct. Back in the glory days when homes, or as we liked to call them, debit cards, were in high demand, the typical conversation between the listing agent and appraiser went something like this.

Appraiser: “I have been asked to appraise the property at 347 Falling Downs. May I meet you there at 3:00 today?

Agent: “Great, yes!”

Appraiser: “What is the sale price?”

And from Mark Madsen at the Bloodhound blog – Why Real Estate Agents should Stop Playing Loan Officer. (I couldn’t agree more; being a Realtor is more than enough for me. I know good lenders; that’s part of my job.

True mortgage professionals are paying attention to things like: HVCC, concerns of HR1728, Mortgage Insurance companies changing their guidelines, Fannie’s new condo rules, FHA fico score requirements, Loan Level Price Adjustments, new FHA appraisal guidelines, adjusting interest rates in an unstable market, and a constant stream of mortgage Twitter chatter that only adds to the noise.

For those of us primarily working with FHA First-Time Home Buyers, we’re also keeping tabs on the $8000 Tax Credit being used as a down payment, as well as how long the Fed plans on purchasing Mortgage Backed Securities to keep rates lower.

Just as real estate agents are learning about short sales, bank owned properties, and transparency, mortgage originators have a full-time job keeping up with industry news so that we can lead our clients down the right path.

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  1. Mark Madsen June 8, 2009 at 09:07

    Thanks for the mention, Jim. Loan officers need to know good agents as well, that is part of our job. 🙂

  2. Jason June 8, 2009 at 10:34

    The article regarding the HVCC is an interesting one. The author is obviously, and understandably, frustrated about the new appraisal process.
    The real content of the post is towards the end of it where there seems be more of an explanation of the HVCC and some of the nasty unintended consequences.

    We, too, are experiencing problems with the implementation of the HVCC. Many of the contracted appraisers are coming in from out of area. And while that might sound good for objectivity purposes, it’s creating havoc with appraisal values. So far we’re seeing more and more out of area appraisers coming back with values much lower than expected (particularly for refinances), which in some cases makes refinancing impossible.

    I don’t know what the solution is to maintaining appraiser independence, but I’m believing more and more every day that the HVCC isn’t it.

  3. Jim Duncan June 8, 2009 at 10:42

    Jason –

    Absolutely. I have experienced a couple incidents this year where the appraiser was grossly negligent – using comps from completely incomparable areas – which clearly demonstrated their lack of understanding of the market. In one case, the appraiser refused to correct the mistakes, the contract fell apart, and the house sold (to the *backup* offer) for the amount we had agreed upon.

    HVCC’s intent may be good, but its implementation is a complete disservice to those it is seeking to protect – the consumer.

  4. Kris Berg June 8, 2009 at 12:48

    Here’s another fun story. I had a home fall out of escrow (that’s not the fun part). We immediately found another buyer, consequently we have two appraisals prepared by two appraisers within one week of each other. The first appraisal came in at price, the second came in $40,000 over, the higher of the two from a gentleman who was new to the neighborhood. Same home, same market, same purchase price. Negligence/incompetence can cut both ways.

  5. Doug Francis June 8, 2009 at 16:20

    I have found that agents and loan officers are afraid to rock the boat… and appraisers fear even the slightest appearance of being “influenced” in any way. Appraisers have ignored good comps and information about updates like new windows or HVAC systems. These things do add value!

    To me, they urgently need to finish creating the “Independent Valuation Protection Institute” to address the realities of the situation.

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