One provision of the proposed HVCC is that lenders will not be allowed to accept appraisals ordered by mortgage brokers or real estate agents [if there is a chance that the loan will end up with Fannie or Freddie].  There is an exception if the appraisal is coming from another lender (with conditions) and a lot of ambiguous wording, but this line stands out:  "The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by any other third party (including mortgage brokers and real estate agents)." 

Many of our clients are brokers and we have worked hard to help them understand USPAP guidelines appraisers are bound by (especially as relate to "pressure" to return appraisals with "predetermined" values).  We have declined to work with brokers and lenders whose methods could lead to an impression of impropriety (or worse).  We have developed a restricted use desk appraisal (a limited market analysis that returns a range of values) to assist homeowners who may already be in financial straights - and have absolutely no idea what the value of their homes might be - in determining whether or not to pursue a mortgage or refinance application before they spend hundreds of dollars that they can't afford.

We believe that our clients share our values and demonstrate integrity in their approach to serving their clients with the highest ethics and integrity.  At the same time, old habits die hard and we have many valued clients who don't understand how simply providing an estimate of what the homeowner thinks their property is worth, or a value needed in order to make the loan work, is automatically perceived as "pressure" by the appraisal industry. 

Our appraisers have never looked at these numbers as pressure, because they have no bearing on the appraiser's opinion of value.  If we don't get the order, that's more than okay - because while we don't ever worry about hitting numbers, we also don't want someone to pay hundreds of dollars for an appraisal that they cannot use.  In those cases we hope that they will rethink their loan, but we are realistic enough to know that some clients might go shopping.  In 5 years of business, we have only lost one major client because we would not "hit numbers".  That's one way we can tell that the clients we work with share our values (no pun intended).

So how can a broker help their client make an educated decision on whether or not to spend the money associated with applying for a loan - especially the cost of the appraisal, one of the first charges and one of the highest.  This is where the RUDA comes in.  Without knowing anything about the loan being sought or the value needed to make the loan work, we can give brokers enough information to make an informed decision about whether or not their client should pursue a loan.  It is not a guarantee of value, and indeed things can and do change in the time between looking at a RUDA and ordering an actual appraisal, and things can and do change once an appraiser sees a property, the neighborhood (oh, you didn't mention the nuclear plant across the street) and the comparable sales.  Still, at least people with no clue as to the market conditions in their neighborhood can get some idea of the range of value of recent, potentially comparable sales.

We are unclear as to how the HVCC will affect homeowners and mortgage brokers.  Will homeowners be willing to roll the dice for $350+ without any prior professional guidance as to current values in their neighborhood?  Or will it have a chilling effect on people who most need to refinance but can't afford to find out if their home has enough value to qualify for the loan they seek?  Will brokers be able to retain our services for an appraisal or, if not, will they want to pay for a market analysis (cheaper than an appraisal but an expense nonetheless). 

We know that many appraisers disagree with the idea of doing any pro-bono work.  They believe that a professional should always be compensated for his/her work.  We understand where they're coming from.  But this is a highly competitive business, and just as a lawyer provides a free consultation to advise a potential client as to the odds of their success in the courtroom, an appraiser should be able to provide a free consultation to a client while remaining in compliance with USPAP in order for that client to make a determination as to the odds of their success in submitting a loan application. 

The idea that every appraiser who provides such a consultation is making a promise to hit a number so the client will order an appraisal is an insult to the entire profession.  We are perfectly capable of saying "here's our analysis, if it looks to you {and your client} like there is enough information to pursue a loan and order an appraisal we hope you'll order from us - and by the way, there is no more guarantee of the appraised value if you order from us or someone else".  In fact, that's what we say.

We had a client ask us recently if he shopped for an appraiser would he find one who would give him a higher value.  Absolutely.  We believe there are appraisers out there who pull comps differently than we do, who make different adjustments for different reasons, or who push values higher for the less ethical reasons that the HVCC seeks to address.  Feel free to shop, we aren't selling values, we're selling value.

We appreciate all of our clients and are always looking for new business.  Please contact us for any information about our services, and please post your views about how the proposed HVCC will affect us all.