Appraisal rules tangle with home values
Those wishing to buy or refi should take heed
By Dian Hymer, Tuesday, August 18, 2009.
How much your home is worth depends on who's looking at it. Your home insurer will value your home in terms of the cost to rebuild it. A mortgage lender's appraiser will value your property in terms of the sale prices of similar homes in your neighborhood that sold recently. The property tax assessor may have a different set of criteria.
Due to recent changes in the economy, the market value of your home could be considerably less than it was a few years ago. However, don't be too quick to ask your insurance carrier to drop the valuation on your homeowner's insurance. This would save you money but could leave you underinsured.
Replacement cost and market value aren't necessarily the same. When home prices peaked in 2006, the market value of your home might have been much higher than the replacement cost value. Today, the sale price of your home could be a lot less than the cost to rebuild.
Talk to your insurance agent about how much coverage you need. This will depend on the square footage of your home, upgrades and amenities, and the price per square foot to rebuild in your area.
HOUSE HUNTING TIP: Most states levy property taxes, and the property tax structure and rate varies from state to state. In California, your initial property tax assessment is based on the purchase price. If you purchased your home in 2006, your property tax base could be higher than your home's current market value. In this case, you can appeal to the assessor's office for a reduction in your property taxes.
The current appraised value of your home, or one you want to buy, may be lower than you expected due to changes brought about by the Fannie Mae Home Valuation Code of Conduct that took effect May 1, 2009. One of the major changes is that loan originators -- mortgage brokers and loan agents -- can no longer talk directly to the appraiser.
This new restriction, while intended to be in the consumer's best interest by keeping loan originators from pressuring appraisers, is resulting in misleading valuations -- not in every case, but in enough cases to raise concern. ...CONTINUED
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Submitted by Fred Glick on August 18, 2009 - 3:36am.
If you are in real estate, plan a vacation for this winter, not now.
It's a hot, muggy August pre-sunrise morning and thoughts of beaches and hydration are on people's minds.
Sweat, shorts and sodas are soaking their souls and the thoughts of economic recovery, tax credits and mortgage backed-securities are not nearing their frontal lobes.
(OK, here comes the BUT....)
BUT, we are just over 90 days away from the second real estate bubble explosion in the last few years.
Why? The expiration of the $8000 tax credit matched with the Gestapo like mortgage guidelines, high interest rates and the lack of job creation will blow up the temporary real estate blip that we've seen since the spring.
If you a first time eligible buyer for the credit, you must CLOSE and FUND by 11-30-2009 in order to get the credit.
That means, you need to find a house and start your inspections, mortgage, etc ASAP so real estate agents need to do a 24/7 for their clients in order that they make the timing.
If you are a Seller, don't be ridiculous, if you need to come down a couple of thousand in order to sell, do it because if you don't, you may cry in your egg nog this Christmas because once the credit goes away (which was the catalyst for buyers to get off the fences to begin with), the buyers go back to the Dark Side!
Now, a message for our friends in the mortgage world:
YOU ARE TURNING AWAY GOOD MORTGAGE WITH STUPID NEW RULES
Need I say more? The rules are just stupid for conventional programs and the crap they are allowing into the Government agency loans (FHA) are also nuts.
I again call for all the mortgage bureaucracies (Fannie, Freddie, FHA, VA, USDA) belong into one agency, one set of guidelines and reality to set back in.
Also, each loan needs to have a small insurance fund payment and the government just needs to back each loan, post-insurance so we never have to bail out banks again.
Now onto rates. If you want to stimulate an economy, the basics are that we lower interest rates and we've done that with the Fed lowering the rates to the banks (Fed funds, etc) but what about rates to the public?
Mortgage rates should be very, very low and there should be very easy rate reduction refinances with NO appraisals for people that have the income and good credit.
Most of their loans are already securitized by Fannie and Freddie, so why not let them take a trip to Banana Republic or a trip to Disneyworld to help get the country going so we can add real jobs.
To summarize, if you are a Buyer that can qualify for the credit, get an agreement as soon as possible because Sellers may raise prices in the early part of September to capitalize on the end-of-the-credit people looking to get their share.
If you don't qualify for the credit, wait until the week before Thanksgiving to start looking.
The buyers will have been sucked out like a vacuum cleaner on high and the winter will start coming in.
Sellers might get into a realistic mood and sell at a lower price.
The other idea is to wait until January or February when they may be suffering more and not have the idea that spring is around the corner.
So real estate people, it's hard work followed by Disneyworld!
Submitted by Barry Noble on August 18, 2009 - 6:50am.
Before you appeal your assessed value in California - be sure you are deep under water. If you bought during the inflated 2004-2005 and early 2006 period, but put forth a good down payment - you may be only a smaller percentage lower value than your mortgage.
The Market is cyclical and despite the negative news coming at you from all sides, the real estate Market is cyclical and it will turn back up. Check - if you appeal the assessment and you obtain a decrease in assessed value, you may lose that wonderful restriction on raising your assessed value for subsequent years, when the Market rebounds. WHEN the Market rebounds, if certain areas regain some of their higher values than others, not having the restriction on reassessing every year might suddenly place you in a further untenable position with increased annual taxes.
But, yes, Californians (I can only speak to my State) if the home value is deep in submarine depths, yes - get those good comparables and appeal the assessed value, or ask a local appraiser for help. If he or she is an "angel" in this down economy and HVCC mess, you may negotiate a reduced fee for the service to help you with a general, sumnary appraisal -not mandatory, but advisable especially if you have a custom or unusual home for the area or tract. Good health and Good Luck to all
Barry Noble
www.MyPropertyIsWorth.com
Certified Residential Appraiser & Broker
Palm Springs CA
Submitted by Joe Loomer on August 18, 2009 - 7:14am.
The HVCC changes are a joke - the oversight agency required by the HVCC has STILL not been formed.
Appraisal issues are so bad the President of NAR and the Chief NAR Economist travelled to DC and New York to talk to the Assistant Attorney General and lawmakers about the impact on virtually every area of the country.
Spot on, Ms. Hymer - the agent and the purchaser (and the seller) are under no such gag-order regarding speaking to appraisers. Do your duty as an agent, and make sure your comps are relevant.
Incidentally, there are five separate bills floating around Congress to either extend or widen the $8,000 tax credit. At least one of these should survive the committe phase where half or more die...
I look for more sales this winter when the extension and re-worked guidlines come out.
Augusta GA Homes
Joe Loomer, USN Ret.
Associate Leadership Council, Growth Chair
Keller Williams Realty Augusta Partners
Submitted by John Murden on August 18, 2009 - 6:21pm.
Here is an AMC bulletin.
Appraiser Bulletin:
HVCC – Borrower Copies of Appraisals
As everyone in the Appraisal industry should be aware, the Home Valuation Code of Conduct (HVCC) was implemented May 1 of this year. One code requirement is that lenders must provide borrowers with a copy of the appraisal no less than three days prior to the closing of the loan.
Now that borrowers have the appraisal, they also have the appraiser’s contact information. Some borrowers are calling appraisers to influence a change in value, which is explicitly against what HVCC is about.
You may experience increased borrower phone calls. If you are contacted by ANY borrower for whom you completed an AMC appraisal:
•DO NOT discuss value or any predetermined outcome of an appraisal with the borrower of a subject property.
If borrowers have questions, indicate to them that due to new industry regulations, all questions and discussions about appraisals MUST occur with their lender or broker. No undue influence can occur between borrowers and appraisers.
Contact the AMC immediately to report the incident. Please have the borrower’s name and, if possible, the address and order number.
• All of YOUR correspondence about appraisal reports MUST be with the AMC representatives ONLY. Do not discuss value or predetermined outcome with borrowers OR lenders, brokers or Real Estate Agents.
This AMC assures that the appraisals presented to our lenders and clients are nothing other than the appraiser’s own opinion. Help us maintain your integrity and ours.