The Home Valuation Code of conduct that went into effect on May 1, 2009 may create the potential for an increase in the number of unethical appraisers. This is because of the legislation puts the burden of order appraisals on the lender who will look into choosing appraisal companies that offer the lowest prices and those on which they can rely to return favorable results. That means doing whatever they deem necessary to make a deal work even if the appraisal is substantially lower or higher than the home's true value.
Appraisers feel the legislation is causing them to lose money because they are doing more work for less money. In addition they are also put on the spot because in order to keep their employment they have to make sure the appraisals allow the lender to make the right deals with the consumers in order to keep the deals flowing. If the appraiser charges more than other appraisers and doesn't attempt to meet the needs of the lender he is liable to lose to other appraisers who are more willing to do what it takes to keep business flowing.
This legislation that was intended to help with inflation within the appraisal industry is causing more problems than it solves. Money is a strong tool within the real estate industry, especially within the reverse mortgage industry. There is a need to provide the lender with the figures he wants in order to ensure continuous work from that lender. This puts an immense burden on the homeowner as well as the lender because both of them are expecting an honest evaluation and this doesn't always happen.
With the lender being able to contract with the appraisers there is also the potential of having an appraiser unfamiliar with the area turning in appraisals. Even an area only 50 miles away can make a big difference if the appraiser who is hired to perform that appraisal is not familiar with that region. There was a case published in Florida where an appraiser came from 44 miles away and appraised a property at $70,000 below its market value because he was not familiar with that area or the market value of the homes.
Because of the potential detrimental effects of this legislation some people in Washington are looking to have the bill set aside until 2011. Whether that is likely to happen is unknown at the present time since lenders have been ordering appraisals since earlier this year. The effects are not just on reverse mortgages but also on conventional mortgages, both of which rely on appraisers to perform an honest evaluation of a property. With the current real estate market and homes in some markets not increasing in value (and some losing value) it is more important than ever for homeowners and lenders to be able to depend on an honest appraisal of any property whether in a conventional mortgage or a reverse mortgage.
The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of "62 Senior Moments." If you would like more information, please call (866) 683-3690 or visit Senior Reverse Mortgage
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