It’s no big surprise that once the government starts micro-managing industries, people in those industries start to get a little scared. Maybe scared is not the correct word-maybe over analytical. With everyone under the sun being blamed for the housing downturn, the current industry most worried about keeping themselves in the good graces of the government is the appraisal industry, for fear of further regulation. Appraisers, once blamed for pushing appraisals up, are now acting super conservative and keeping appraisals down.
With the recent HVCC (Housing Valuation Code of Conduct) guidelines in place, lenders can no longer directly select appraisers. Now, appraisers and lenders must act at arms length from each other and be chosen by a neutral third party for each real estate transaction needing an appraisal.
However one problem I see with the micro-managing of appraisers is that with lenders no longer able to select appraisers they know are experienced and competent, now incompetent appraisers are forever kept in the business. The third party who selects the appraiser takes names out of a pool with no consideration of to the competency of that person. These people keep getting jobs when the market should be making them leave the business.
Imagine if all Realtors were placed in a pool and each home owner or buyer had to select out of a hat who would represent them. With all agents now guaranteed some type of business, incompetent agents would stay in the real estate industry and all of us as a whole would suffer, agents and clients alike. Client relationships that have taken years to develop would vanish over night, just as it has in the appraisal industry.
In the last six months, I have run across more incompetent appraisers than I have in the last seven years. You can tell by simply talking to them for the first time. Some don’t really care and sound uninterested when you speak to them. They speak of “guidelines” and “rules” they must follow which don’t exist. They give you comparables that any experienced appraiser knows are not good comparables, and when you try to give them actual comparables which work, they shun them and refuse to consider the homes that truly confirm value.
Yeah, I am not an appraiser, but I know enough, and have experience enough, and have spoken with enough seasoned appraisers to know what I am talking about. The new HVCC guidelines are keeping junk appraisers in the business, and these incompetent folks are killing plenty of real estate deals. I have spoken to many agents who have examples of an appraiser killing a transaction. Some agents are fighting back and disputing appraisals with valid data, but many lose. The worst part is that two parties, the seller and buyer, who want to complete the transaction, are having their hands tied by appraisers who really don’t know what the hell they are doing.