Beware New Appraisal Rules

Choosing your Lender carefully is more important than ever!

By now many of you have read or heard that lending became more complicated with some lenders when a new law, called the Home Valuation Code of Conduct (HVCC), became effective on May 1, 2009 and created confusion and frustration with respect to the appraisal process. I recently attended a leadership summit in Chicago sponsored by the National Association of Realtors (NAR) and I can tell you that trying to address and fix the problems this new law has created is a primary legislative focus for NAR during the upcoming year.

It is ironic that this new law created such a firestorm, because its intent was, on the surface, a good one, i.e. to prevent those who stand to profit from a real estate transaction from putting undue pressure on the appraiser. It sounds so simple, but in practice the new law apparently has caused untenable delays across the nation and with many frustrated buyers backing out of real estate transactions. Some of the horror stories relate to some of the larger underwriters engaging national appraisal clearinghouses that send in "out of area" appraisers unfamilar with a local market resulting in appraisals that don't reflect local market conditions. Or sometimes, the problem has been that a local appraiser is engaged, but the national underwriter places the appraisal in a never-never land of "appraisal review." I've encountered several deals like that this summer involving a Durango sale that is placed in "appraisal review," presumably somewhere on the East coast and several weeks can go by before we ever hear back. In some instances, we never heard back! Fortunately, the Buyers in those instances were able to move to superb local lenders who got their purchases over the finish line. However, this did require the cooperation of the Sellers to extend out the Closing dates to accommodate starting over with new lenders!

I have always been an advocate of using local lenders familiar with our Durango area real estate market. Many of the local lending companies knew about this new law and had systems in place to make a smooth transition well before the May 1, 2009 effective date. The customers who work with those lenders don't seem to be experiencing as many, or any problems resulting from the new appraisal process. Now more than ever I recommend that Buyers carefully review with the lender of their choice how the appraisal process works for that lender. Some questions to ask are: Are only local appraisers on the panel of appraisers that must be selected from? Are the underwriters to be used by the lender also local in nature so that if something is sent to "appraisal review" it will be reviewed by an entity familiar with the Colorado market and in particular, the Durango market? What is the lender's recent track record with appraisal issues and closing delays because of appraisal issues?

If you have any questions, please do not hesitate to contact me. You can reach me, Don Ricedorff, at The Wells Group 970-375-7014, don@frontier.net, or at my website at durangorealproperty.com

Don Ricedorff is a licensed real estate broker in the State of Colorado, with 16 years of experience, and he resides in Durango Colorado. He has numerous real estate designations, which have provided him with an unparalleled education to assist his clients.

The designations include:

CRS, Certified Residential Specialist
CRB, Certified Residential Broker
CCIM, Certified Commercial Investment Member
CDPE, Certified Distressed Property Expert
ABR, Accredited Buyer Representation
GRI, Graduate of Realtor Institute
RSPS, Resort and Second Home Property Specialist
CIPS, Certified International Property Specialist
SRES,Senior Real Estate Specialist

He is also an active volunteer in the community and his church. His highest aspiration is spending time with his wife, Janet, and his three children Kelly, Katie, and Kyle. His other interests include playing tennis, fly fishing, hiking, boating, and water skiing.