How New Appraisal Guidelines Will Affect You

The way appraisals are done and handled is changing dramatically thanks to the new Home Valuation Code of Conduct (HVCC). Rhonda Porter wrote a good post explaining the changes over at Rain City Guide. Here’s an excerpt:

In a nutshell, mortgage originators (if paid commission) will no longer have contact with appraisers for conventional mortgages.  Appraisals will be ordered via an appraisal management company–oddly similar to what Washington Mutual used before New York  Attorney General Cuomo investigated.   Although this is effective for loans delivered to Fannie/Freddie on May 1, 2009 or later, lenders will adopt the Code well in advance in order to be able to deliver compliant loans.

The good and the bad of the new appraisal guidelines…

Good

• Appraisers and lenders have distance put between them creating less opportunities for lenders to push appraisers to “hit the number” (aka inflate the appraisal price to meet overvalued sales prices).***
• This will create decreased risk for lenders which will help keep interest rates lower (in theory)

***Fannie Mae amended their guidelines in January of this year allowing appraisal management companies to be owned by lenders. (?!)

Bad

• There’s a lot of them – just read Kenneth Harvey’s article in the Washington Post, “New Appraisal Rules Comes With Costs”
• Though many of the changes will directly and immediately affect appraisers and lenders,  things will trickle down and may start negatively affecting consumers as well.

Buyers On The Sidelines Hurt Home Prices In Loudoun County

According to a Bank of America survey of agents, the Washington, DC area (including Loudoun County) was one of the 5 real estate markets (AZ/CA/FL/NV/DC) that saw the most significant price declines and greatest deterioration in traffic in September. Buyer traffic fell further below expectations in September as buyers returned to the sidelines after witnessing continued price declines and fearing even more.

The survey found that:

• 74 percent of agents said that buyer activity was less than expected
• 71 percent said home prices decreased
• 70 percent said the time it took to sell a home increased

These results tie in to the preliminary sales numbers we ran on 9/28, which showed Loudoun County home sales in September being at their lowest point since 2002.

But there is good news – inventory in Loudoun County has remained relatively the same for several months now. This is in contrast to most markets in the US which have seen inventory increase putting even more downward pressure on prices.