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!

Beazer Homes to Pay $50M to Victimized Home Buyers

I’ve warned homebuyers before, “Don’t get taken to to the cleaners by home builders and their lenders”. And here’s why: In order to avoid prosecution on criminal fraud conspiracy charges, Beazer Homes agrees to pay $50 million in restitution to homebuyers who were allegedly victimized by the builder’s mortgage company.

Beazer and its subsidiary, Beazer Mortgage Corp., admitted to engaging in several fraudulent mortgage origination practices, prosecutors said, including keeping discount points that should have been used to provide some homebuyers with a reduced interest rate.

Other homebuyers were told they were receiving a “gift” from a charity to cover their down payment when, in fact, the purchase price of the home they purchased was increased to offset the supposed “gift.”

Beazer also accepted responsibility for fraudulently circumventing HUD’s “Neighborhood Watch” and “Credit Watch” programs, and of instituting a strategy of “willful blindness” with regard to some stated-income loans, prosecutors said.

Beazer Homes said Wednesday that it also reached a settlement agreement with the Department of Housing and Urban Development and the civil division of the Department of Justice. The company also said several of its subsidiaries have entered into a settlement agreement with the North Carolina Real Estate Commission.

Despite the $50 million agreement, neither Beazer nor homebuyers may be out of the woods. Prosecutors are also accusing Beazer Homes of mortgage and accounting fraud. And sources say that Beazer may declare bankruptcy, which would put homebuyers at the bottom of the list for getting money once the builder’s assets are liquidated.

And if you think that Beazer was the only one doing this and you’re in the clear because you bought from different home builder, you may be in for a rude awakening. There have been several state and federal lawsuits over the past few years involving many other home builders, small and large and I’m willing to bet more will follow.

The more of the story?

If you don’t know exactly what you’re doing nor what pitfalls and shady practices to look out for, you can, and as in this case, will get taken to the cleaners. Hire a Buyer’s Agent who is familiar with new home builders (aka has done numerous new home builder transactions) and take them with you whenever you visit a new home builder’s sales center.

A Buyer’s Agent who knows the ins and outs of new home builders will help you avoid getting ripped off and keep you out of trouble. They will be able to tell you if the builder is telling the truth or feeding you lies or if their “special deal” is really a deal or just fluff (as was the case with Beazer). Your Buyer’s Agent will also be able to guide you through the builders gazillion page contract and addenda, mortgage/financing process, builder’s Design Center process, pre-drywall inspection, final inspection, settlement, etc.

What will your Buyer’s Agent cost you? Not a penny more than what you would pay if you did not have an agent – the builder has already built the commission into the sales price. And no – the builder will not refund or credit you that amount of commission if you don’t have an agent.

Additional sources: Inman News

The Facts About The American Clean Energy and Security Act

Here are some of the facts about H.R. 2454 (now H.R. 2998),  the American Clean Energy and Security Act of 2009.

The bill, as it passed the House:

• Limits the energy labeling provisions to new construction only
• Prohibits the Environmental Protection Agency from regulating carbon emissions from residential and commercial buildings under the Clean Air Act
• Eliminates an early proposal to bolster a private right of action so the citizens could sue over minor climate risks under the Clean Air Act ; that proposal is no longer in the bill as passed by the house
• Provides property owners with significant financial incentives, matching grants and the tools to make property improvements and reduce their energy bills
• Establishes a multitude of green building incentives for HUD  housing, including a loan program for renewable energy, block grants and credit for upgrades in mortgage underwriting
• Does NOT create energy audit requirements for real property at time of sale
• Exempts existing homes, multifamily and commercial buildings from any federal energy labeling guidelines (such as the existing federal Energy Star label program)
• Leaves decision entirely to state governments whether to pass a law to require labels (but it expressly prohibits labeling during a transaction)
• Creates a national building code standard that improves energy efficiency in buildings (and states have one year to bring their state codes into compliance)
• Prohibits the Environmental Protection Agency (EPA) from regulating carbon emissions from residential and commercial buildings under the Clean Air Act
• No longer includes provisions to bolster private right of action under the Clean Air Act that would have allowed citizens to halt construction over minor risks – whether real or imagined
• Offers property owners with matching grants and diagnostic tools to make property improvements that save energy
• Provides green-building financial incentives for HUD housing, including loans, block grants and credit in underwriting for energy improvements

There’s a lot more in the bill than just this, but these are some of the highlights of the bill pertaining to homeowners, buyers, sellers and Realotrs. Click here for H.R. 2454 (now H.R. 2998),  the American Clean Energy and Security Act of 2009, in its’ entirety.

Loudoun Community Spotlight: Pulte Homes, Windermere in Ashburn

This Loudoun County Community Spotlight falls on the Pulte Homes Windermere community in Ashburn, VA. The Windermere community is located near the corner of Claiborne Parkway and Croson Lane immediately next to the Broadlands community.

Windermere is a mix of large town homes and medium sized single family homes. A total of 91 town homes and 83 single family homes will make up the community. Pulte has built or sold about 35 percent of the total homes so far and they’re expecting to sell the remainder of the community within the next 18 months. That puts completion of the entire community at about 24 months.

In speaking with the Pulte sales staff, I found out that they’ve already sold 9 homes this month (that’s a lot for new construction especially in a community of only 174 homes). I’m sometimes skeptical at how busy they say they are, but I’m going to believe them on this one – there at the same time as I was today were three Buyer’s Agents with their clients, two other sets of buyers without an agent and one set of buyers about to write a contract. And that was at 3:30pm on a Wednesday.

Base Prices/Models

Prices on the town homes start at $380K for the Westley II interior model (2296 – 2735 sq ft) and $390K for the Tyler exterior model (2411 – 2857 sq ft).

Prices on the single family homes start at $524K for the Kenley model (2696 sq ft on upper two levels); $533K for the Wynnewood model (2770 sq ft on upper two levels); and $542K for the Jamestown model (2974 sq ft on upper two levels).

Delivery Dates

Delivery dates vary, but count on about 4 to 6 months on the town homes and about 6 months on the single family homes. There are some “spec” homes available for earlier delivery including a Tyler model in the low $400K’s with a September delivery date.

Incentives

Pulte is offering some incentives as far as closing costs if you use their preferred lender. As for wiggle room in the base prices and/or options, there may or may not be any – that’s a secret I’ll only share with my clients (it’s only fair).

Amenities/HOA fees

Two things that popped out at me were the lack of amenities and not-much-return HOA fees. There are no amenities in the community yet, the HOA fee is $86 for single family homes and $100 for town homes. Considering what other communities within Ashburn and Loudoun County charge for HOA fees and the amenities they offer, Windermere has high HOA fees with little offered to home owners in return. In case you’re wondering…neither I (nor the sale rep from Pulte) could figure out why the town home fees are higher than the single family home fees.

Photos/Video Tour

There should be a slideshow of community photos I took at the top of this post (click here if you don’t see it). And don’t forget to check out my two-part video tour of the Windermere Pulte Homes Westley II and Tyler model town homes – part one and part two.

Visiting the new homes sales center in person

Make sure you have your Buyer’s Agent with you when you visit a new home/builder sales center. Click here to find out why.

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