Appraisal House Blog

I have been getting more and more email about the HVCC (Home Valuation Code of Conduct) agreement, and the more I read it, the more I hate it.  Once again (similar to prior attempts to curb lender pressure), it is a poorly worded document that only truly hurts the appraisers, while giving the equivalent of only a nasty look to the lenders and loan officers that created the problem.  As appraisers have always stated, without having to worry about future business, we would never inflate a value.  But when you are one of those crazy people that likes to eat and have a roof over their heads, you are at the mercy of the lenders. 
The agreement states that no one will "...withhold or threaten to withhold future business for an appraiser..." but I've never heard anyone tell me how you actually prove that.  So that is pretty much just wasted ink. 

The big thing that bugs me about this is that it forces all lenders to go through a 3rd party to order appraisals, whether it is a management company, a random rotation of approved appraisers that a lender maintains, or even a "co-op" that some appraisers have suggested.  
The agreement specifically states that, "All members of the lenders loan production staff, as well as any person...who is compensated on a commission basis upon the successful completion of a loan...shall be forbidden from...selecting, retaining, recommending, or influencing the selection of any appraiser..."

I hate it (besides the obvious reduction in income that it will cause) because it takes away all of the capitalism and entrepreneurship from my business.  I've worked hard to build a business, and I want to keep growing it.  And now all of the sudden the government is telling me that I have no choice but to sign up with appraisal management companies, and then just sit around and wait for the phone to ring.  So my marketing and sales is now reduced to filling out forms, hoping my phone rings, and working for half price (if I'm lucky). 

And on top of that, who actually believes that working through a management company will be any better?  The lenders are still on the top rung of the ladder, and they will do the same thing they do now to the AMC's.  "Well, it looks like Slimy Appraisal Management gets appraisals to meet or exceed value 92% of the time, while Honest Mikes Management only hits the number 80% of the time.  I think we should use Slimy most of the time from now on."  And the first time I don't make a number work for Slimy will be the last time they will call me.  They have no choice but to satisfy their client, and the so the circle continues. 

So here is the solution, in my opinion.  The only person higher on the ladder than the lender is the buyer or borrower.  So I think it is time that we went "retail", just like home inspectors.  I acknowledge that refi borrowers will still be a problem, but I no longer worry as much about the repeat business, and so if they don't like my honest opinion, they can pay for as many appraisals as they want until they get the number they like.  For buyers, though, just like an inspection, they would almost always want to know what the actual value of the house is, and not just a number that won't slow down the loan process. 

To do this would require a major shift in the way we do business, but at least the entrepreneur who wants to work hard and grow his business can still do so, the fees stay the same, and there is just no need for a management company.  I also think that this offers room for more products offerings, such as an "assisted AVM" where the appraiser just photographs the interior and comments on the overall condition, but does not determine a value.  You are now marketing to selling agents/realtors, who also are supposed to be working in the best interests of their clients.  Worst case, the buyer and seller each purchase an appraisal, and they work out the difference between the two (more business for us!). 

Okay, I'm ready to get pounded on this, so tell me why this doesn't work?

TEXAS JOKE:  Why did the chicken cross the road?  To show the armadillo that it could be done.