Source: http://www.hvccappraisalcompliance.com
The Agreement between Andrew Cuomo, Fannie Mae and Freddie Mac gives lenders selling loans to Fannie and Freddie just two choices:
In other words, The mortgage company or real estate agent can have no contact or influance on the selection of an appraiser.
What has sprung up from these rules are Appraisal Management Companies (AMC). National banks use AMCs as their source for appraisals. The appraiser in many cases is based in a different market. A typical appraisal costs about $500. It used to be the appraiser kept their entire fee. Today, the AMC's are capturing about half of the fee being the middle man. The AMCs are unregulated, whereas the appraisers, real estate agents, and mortgage brokers are. There is no guarantee when a AMC assigns an appraiser that they even know the area and not only do they not know the area, they are often inexperienced.
Example: I heard one story of an appraiser at a Greeley property that found comps for the subject home that were 6 months old. The appraiser determined the value based on 6-month comps... let's say $200,000... the AMC said Greeley was a declining market, so the appraiser took it upon themself to say the property lost 1% in value/month over the past 6 months. If the offer was at $195,000, the appraisal in this scenario would come in at $190,198. When this happens, here are the choices; buyer comes to the table with about $5K extra, seller lowers price, or buyer seeks other lender and pays for another appraisal. As apprasials are no longer transferrable between lenders under the new rules, except for FHA loans.
The main result that has happened with the HVCC is longer closing periods. Before May 1st, 30 days was the typical closing period. Now, lenders are saying 45-60 days. Of course, this means that if you lock a rate at this timeline, the consumer has to pay extra for that lock. Some lenders are asking for appraisal reviews a day before closing, even after they have approved the loan. In Colorado, if a property does not close on or before the closing date without an Amend/Extend between both parties, the contract is VOID and the buyer loses their earnest money.
I am giving you the heads up on this because it is a huge issue in real estate and will effect the value of homes and add extra cost to the consumer. Weld county is leading the nation out of the foreclosure crisis, and I think when the numbers come out, the new regulation will show that it is stagnating our recovery. The consumer needs to know the days of the 30-day closings are gone.