Lenders are accepting broker-ordered appraisals (i.e. from me) when any application is dated and submitted by the borrower before May 1st, 2009. If you date your application May 1st and after, then we have to go through Appraisal Management Companies (AMCs). The significant negatives of being forced to order through an AMC are:
1. The charge for appraisals increases. Because of my relationship with independent appraisers that I have used and trusted that past eight years, their standard fee is $350. The minimum charge for appraisals through AMCs is $440 on the cheap side. It will often be more.
2. They will not do comp searches. We just have to order the appraisal and see what value the appraiser determines. We will not have an idea beforehand to see if refinancing makes sense. This will incur a cost regardless of value because they did the work for the appraisal. Please be aware of your value and what homes in your immediate neighborhood are selling for.
If you get your application in before May 1st, we can avoid ordering through an AMC.
I wrote a thorough blog post about the Home Valuation Code of Conduct here.
Is there any upside to this new law? Does it at least protect anybody?
Hi Amy, thanks for your comment! The *purpose* behind the Code is to protect everyone from over-inflated prices. Appraisers are/were encouraged to bring value in to the point where it would make the deal work. This code is meant to eliminate those attempts so that a more neutral interpretation of value is established (because they won’t hear from interested parties that the value of the home must come in at xxxx). But my personal opinion is that the Code will not actually satisfy that purpose. I guarantee you that I can send two different appraisers out to a property, and depending on the comps they use and their style to appraising, they will come in with two totally different values.
In practice, the new law is causing otherwise legitimate sales, with prices agreed to by both parties, to fall through because new appraisers are coming into sub-markets that they are not completely familiar with. Appraisals could also be coming in artificially low, even in this economy, because the smaller appraisers are not familiar with these sub-markets, and they fear legal ramifications if their appraisal is too high.
You said it very succinctly, Ryan. In addition, I’m still blown away by what these AMCs are charging for appraisals – it’s disgusting.