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Buyers Lose Offers, Pay More Thanks to New HVCC Appraisal Rules


The new Home Valuation Code of Conduct (HVCC) rules that went into effect May 1, 2009 were supposed to protect consumers purchasing and refinancing homes by eliminating fraud and inflated appraisals. But the new appraisal rules are having a completely different and negative effect. They have made buying real estate harder and more expensive for home buyers. And it’s not only buyers getting hurt – it’s sellers, appraisers, real estate agents and lenders.

I’m not going to go into detail as to how the new process works here on this post. For a great explanation of that, check out Chris Griffith’s post entitled, “The HVCC Wal-Mart Effect”.

What I am going to discuss is how buying and selling real estate has changed since the new rules went into effect. Let’s take a look at real life examples involving either my or fellow agent’s clients…

Real life example #1: Appraisals are coming in low. And sometimes ridiculously low. Buyers who don’t have a hidden stash of thousands of dollars to make up the difference between the appraised value and purchase price are left to try and convince the seller to lower their purchase price. Any seller and their listing agent who knows the local real estate market and values will know that the appraisal is not accurate and tell the buyer to take a hike (in this market, there’s another ready, willing and able buyer nearby).

This just cost the buyer the chance to buy a home they love and they have to start back at square one. The seller has to go back on market in order to avoid losing thousands of dollars thanks to an inaccurate appraisal.

Real life example #2: Many Listing Agents and sellers no longer want to see FHA or VA financing on an offer. They’re either taking lower offers that are doing conventional financing or flat out saying, “No FHA or VA financing.”

Buyers with FHA or VHA financing are getting their offers rejected or can’t even submit an offer on many properties.

Real life example #3: Based on the average time from contract to settlement date (30 to 45 days), buyers are locking in their interest rates, setting up movers, contractors, turning in notices to their landlords, terminating leases, etc. As little as only 1 week before settlement date, the appraisal is nowhere to be found. Sometimes, not even the appraiser is anywhere to be found. Either the appraiser has to be hunted down or another appraisal has to be ordered. Either way, settlement is delayed.

To the buyer, this could lead to their rate lock expiring and their interest rate becomes higher than at the time of contract. It could also mean that they now have to pay a penalty for rescheduling movers, contractors, the lease termination date, etc. And even worse, it could mean that the buyer is in default of the contract – this could lead to a $100 per day penalty and/or loss of earnest money deposit.

Real life example #4: Appraisal fees were an average of $300 to $350. Now they’re an average of $400 to $500.

Who pays the appraisal fee? The buyer.

Real life example #5: A mortgage broker goes with lender “A” for the buyer’s financing only to find out that lender “B” has a lower interest rate and lower closing costs. Rather than lender “B” being able to use the completed appraisal from lender “A,” lender “B” has to order a new appraisal costing the buyer another appraisal fee.

The buyer has to pay another $400 to $450 for the second appraisal.

These are just some of the real life examples of what’s going on out there. As long as the HVCC stays in effect, home buyers will continue to pay more money for crappier service and, in many cases, their chances of getting their offer accepted will continue to be diminished. Not only is the HVCC screwing the transaction up for buyers and sellers, the new HVCC rules could be the single largest hurdle to US home price recovery.

The HVCC needs to be rescinded or changed – ASAP!



20 Comments on "Buyers Lose Offers, Pay More Thanks to New HVCC Appraisal Rules"

  1. Krisstina Wise on Fri, 10th Jul 2009 6:53 pm 

    It is excellent to see other people bringing forth the impact of HVCC. In Austin, I’ve created a blog ( that serves as a forum for homeowners, lenders, Realtors and appraisers who have been affected. KVUE recently ran a newscast on the issue ( Keep the flow of information going. Thanks.

  2. Rick V on Tue, 14th Jul 2009 3:25 pm 

    Ok, I thought it was just me. I experienced 1, 3, and 4 personally. Couldn’t figure out why it took so long, came in so low, and now I have to do it twice because they screwed up. It worked out for the better in the end, but man, what a pain.

    Great post. Good luck to everyone out there!

  3. Danilo Bogdanovic on Tue, 14th Jul 2009 10:44 pm 

    Thanks and glad things finally worked out. Unfortunately, I think that we’ll continue seeing issues until they put the new HVCC rules on hold or change them.

  4. Danilo Bogdanovic on Tue, 14th Jul 2009 10:48 pm 

    Krisstina – Glad it’s starting to get mass media coverage. We need much more public awareness to get the public behind the need for changes.

    Great blog post and video clip! Will share that with others for sure.

  5. appraisals, problems, hvcc » Sarah Stelmok on Mon, 27th Jul 2009 8:29 am 

    [...] Danilo Bogdanovic of writes a very interesting post on issues with HVCC, “Buyers Lose Offers, Pay More Thanks to New HVCC Appraisal Rules“.  Rather than recreate the wheel, I’ll introduce you to his post.  You can also get [...]

  6. cheryl on Tue, 18th Aug 2009 1:49 pm 

    I tried to refinance my home, to purchase a condo in AZ. Its only 60K that I needed, and I thought I would have at least 150K in equity, by the comps in my area. The appraiser assigned had no knowledge of the area, was very unprofessional, and missed many things in my home that ad to the value. Needless to say the appraisal came back very low and I couldn’t get enough out to purchase the condo. I did file a complaint, yes there is actually an Appraisal review board. The investigater appraiser came with a prosecutor and redid the appraisal. Yes, there were mistakes, and this will go to court to punish the appraiser. But that will take a year or more!! I already lost out on purchasing the condo, and still dont have a decent appraisal. I did complain to the Bank that hired the appraiser, and got my money refunded. But now 4 months later, I am back where I started. Looking for a condo, and hoping the next appraiser is competent.

  7. Danilo Bogdanovic on Tue, 18th Aug 2009 2:50 pm 

    Cheryl – Your example sums it up well. The National Association of Realtors and the National Association of Home Builders are being very vocal about these issues with the government. If NAR and NAHB do anything right, it’s definitely lobbying on the Hill so I’m fairly optimistic that we’ll see some changes soon. I hope that you have a better experience the second time around. If I can be of help, don’t hesitate to email or call me.

  8. Steven on Tue, 10th Nov 2009 4:07 pm 

    Have read horror stories. HVCC abolishment. Misleading appraisals violating USPAP. Inexperienced appraisers appraising. Financial fraudulent discrimination. Knowingly not accepting FHA VA loans. Whats next? No good appraisers left?

  9. Tara Jennings on Thu, 17th Dec 2009 1:38 am 

    We are trying to buy a bank-owned home the appraiser has made numerous errors and we cannot do anything… we are 6 days out from our original closing date & $700.00 GREATER IN DEBT FROM IT & OUR LENDER WILL NOT LET US WAIVE THE 3 DAY WAIT PIERIOD DUE TO THIER COMPANY POLICY!!! total crap! This is the worse closing I have ever encountered!

  10. Danilo Bogdanovic on Thu, 17th Dec 2009 9:50 pm 

    Tara – I’m sorry to hear about your experience and that your frustrated. I don’t have the details so I can’t comment on much, but I can say that the 3 day wait period rule applies to every lender I’ve ever seen or worked with. I hope everything works out and your settlement goes smoothly.

  11. Trish on Wed, 6th Jan 2010 5:48 pm 

    A week before closing, we found out that the appraisal on the home we own came in low. We moved everything out, had come down nearly $15,000 in our asking price and have seen other homes in the area that sold for more and were much smaller and in much worse condition and/or poor location. We are frustrated and it’s all because of the new HVCC rules. They do not even allow you to get your own appraisal done as a seller to see if that will help.

  12. Stephen Hancock on Wed, 13th Jan 2010 1:35 pm 

    I am an appraiser with 20 years experience. I have always done very well in my profession until this new system was implemented. I used to do 40 appraisals a month, now I am lucky to do 15. The managemnent companys will not send you work unless you will accept their fees for services rendered ($200). Appraisal fees in 1985 was $275. Banks and our political system have made a mockery of this Industry. I was used by my clients because they had trust in my abilities. These same clients are being punished as well as I with a RETARDED, inept process that has a negative impact on consumers and the economic recovery of this country. There is no logic for this system. The system was working fine, like it has for 20 years.Banks lending guidelines were to liberal in 2004 and 2005. Interest rates should have been raised to slow down the economy during that period. Appraisers should not to be the scapegoat for poor banking policies and a political system that favors big banking.There are so many orginizations in this country that continue to protest this insane HVCC BULLSHIT and no one seems to be listening!!!??? What if the government said that all service industries in this country had to go thru a management company and your fees would be reduced to 50% and the other half would be collected by the management company( even if you do all the work)??? This is the biggest RIPP OFF in AMERICA and it reflects how inept and stupid our leadership is in this country..

  13. nan on Mon, 18th Jan 2010 11:59 am 

    I have worked for AMC’s as a contract appraiser for several years. They have always been difficult but since HVCC they have become arrogant monsters. I had one company (Equifax) call here asking if I would sign a power of attorney giving them permission to change the report once I send it in!!! Can you believe it?? I HAVE to bring values in low if the report is ever going to clear underwriting by these out of state, non licensed, know-nothing idiots they hire to review my work. Frankly, after 15 years in the business I’m done.

  14. Allison on Wed, 24th Feb 2010 10:35 pm 

    I think everyone should remember what happened a couple of years ago when house prices were artificially inflated by hundreds of thousands of dollars due to lack of this type of regulation. In case you don’t remember, look around, I’m sure you’ll see a few foreclosures in your area. And it affects ALL of us–our entire economy. I am struggling right now with a low appraisal as well, and we are not sure what the outcome will be–BUT, at least there is some objectivity now. I think that appraisers (and banks) are simply a bit conservative due to fear right now. There needs to be something in the middle. Don’t be so quick to forget.

  15. Danilo Bogdanovic on Thu, 25th Feb 2010 12:48 am 

    Allison – You make a great point about not forgetting what happened during the boom market. But there was regulation back then too, just a different form of it. Regulation will always have it’s flaws. And the faster the regulation gets thrown out, the greater the flaws. This HVCC is a prime example of well-intended regulation that has punished the majority of those (honest consumers and honest appraisers) that were meant to be protected by it. And that’s what happens when hasty regulation with shallow thought is put into it.

  16. Mark Shultz on Tue, 2nd Mar 2010 11:44 am 

    I have been an appraiser for 27 yrs. and have never witnessed such arrogance among the real estate community as a whole. Real estate agents should be trained in the appraisal process,not just 2 hours in a 12 hour continuing ed. course, rather, 30 to 45 hours (minimum) of class time with exams as part of the prerequisite of obtaining a sales license. Lets see how many agent candidates will pass. More than likely, not many. Question: Why is it, when a R.E. Agent sells their own home, the listing and sales price is generally overstated for the area? Are they that smart??

  17. Danilo Bogdanovic on Tue, 2nd Mar 2010 1:30 pm 

    Mark – Making a blanket statement like that is not fair. I’ve had experiences with some completely inept and incompetent appraisers before, but I’ve also had experiences with many incredible good, smart and capable appraisers (a few clients of mine are appraisers as well). For me to say that the whole appraisal industry is incompetent would be wrong and unfair as it is for you to say that about all RE agents.

    Not sure what the purpose would be of RE agents getting their appraisal license – in VA, they are legally two separate licenses with different sets of responsibilities, skill sets and clients. Your clients are banks. Our clients are sellers and buyers. I don’t claim to be an appraiser nor give appraisals to clients. If I decide to branch out and become an appraiser, then I’ll go through the process and become an appraiser.

    As far as why some RE agents list their home for more than what’s it worth, it’s because they’re human. Just like some sellers want to list their home for what they think it’s worth, which may or may not be market value, RE agents listing their own home sometimes forget about facts and being objective and let their personal motivations and emotion get involved. But that’s human nature and it will never change.

    As far as the sales price being “overstated” – if a ready, willing and able buyer is willing to pay “X” amount for a property and it’s an arms-length transaction, then there’s nothing wrong. What’s worth $10 to you may only be worth $5 to me and vice verse. It’s not up to you to judge an individual for what they’re willing to pay for a property – even as an appraiser.

  18. Jon Lorenzen on Fri, 5th Mar 2010 9:52 am 

    I work for a custom builder, and recently completed the construction of a new home on my existing lot. My company fronted the construction cost for me, based on the appraisal (for the existing lot along with plans and specs for the new house) and the commitment letter I received from my bank.

    As time went by, I realized that I may not complete construction within the 6 month appraisal period. I asked my lender what that would mean, and he said that is wasn’t a big deal, the final bank inspection would be completed by the same appriaser, and all she would need to do is re-certify the value. (I forgot to mention that it took 6 weeks to get the appraisal report back, and then another month for the commitment letter, which postponed my start)

    Everything was going smoothly, and the appraiser came back out and did confirm the original appraised value. I had my settlement scheduled on a Tuesday, but they kept postponing it saying that the underwriter was requesting one additional comp for her report. After getting postponed until that Friday, I got an email about an hour before the scheduled settlement saying that the underwriter was now asking for a completely new appraisal. I knew that was trouble. Anyway, the bank ordered a new appraisal (of course that means that I have to be at the mercy of some random person who may have a totally different opinion. They came out that next monday morning and did their walk-thru and took the required pictures. He also asked if he could see the original appraisal which I gladly showed him. He asked where I needed it to come in (although he did say that there were no promises) so I told him that the original number is what I needed. I also advised him of a couple relevant comps within my neighborhood that were much higher than the number I was looking for.

    To make a very long story a little shorter, the value came in $15K less than it was originally. He did not use the comps I recommended, and used comps for older (non-custom) homes in tract neighborhoods, without similar features. In addition, I have done a little research, and property values have actually been on the rise in my area, not a decline. I also know for a fact that he copied most of the information off of the original appraisers report, because there was a blatant error made on his that I had noticed on the first.

    Meanwhile, I am left having to tell my very generous boss that I might not have all the money I need to repay him for the construction.

    I have already submitted my appeal, and am supposed to find out the verdict today sometime.


  19. Mark Shultz on Fri, 5th Mar 2010 2:57 pm 


    Given the information in your comment, depending on the time element this took place (year), price range of your property and state, community it is located, $15K is not much on a $500K home, but is on a $150K home. Which is it. Many markets have changed numerous times in a 6 month period. Sounds like the lender for your construction loan did not advise you correctly as to market fluctuations and what could happen after 6 months with your loan. I never ask a homeowner the number they need for the deal to work. The appraiser is clearly an idiot. Next time, do not offer the appraiser any information regarding a previous appraisal. Let the appraiser do the work and if errors are made, you have a better case for an appraisal review or another new appraisal. My golden rule as an appraiser is, meet with a smile, greet with a handshake, ask about utilities, major updates which may not be obvious, take notes and pictures, measure the house and I am gone. If a homeowner starts to discuss a previous appraisal or appraiser, I let them know in a professional way that its best if we do not address those issues.

  20. Mark Shultz on Fri, 5th Mar 2010 3:04 pm 


    Given the information in your comment, depending on the price range of your property and state, community it is located, $15K is not much on a $500K home, but is on a $150K home. Which is it? Many markets have changed numerous times in the past 6 months. Sounds like the lender for your construction loan did not advise you correctly as to market fluctuations and what could happen after 6 months with your loan. I never ask a homeowner the number they need for the deal to work. The appraiser is clearly an idiot. Next time, do not offer the appraiser any information regarding a previous appraisal. Let the appraiser do the work and if errors are made, you have a better case for an appraisal review or another new appraisal. My golden rule as an appraiser is, meet with a smile, greet with a handshake, ask about utilities, major updates which may not be obvious, take notes and pictures, measure the house and I am gone. If a homeowner starts to discuss a previous appraisal or appraiser, I let them know in a professional way that its best if we do not address those issues.

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