Getting an Appraisal

Why might you need an appraisal? How do appraisals work?

As of May 1st , 2009 The Home Valuation Code of Conduct (HVCC)has dramatically effected the way appraisals are ordered. If you are doing a conventional loan, the appraisal will ultimately be ordered by the bank. (Although you still need to pay for it.) If you order an appraisal on your own beforehand, you will end up paying for two appraisals. The HVCC will soon apply to FHA financing. Please see my article posted on discussing the ramifications of this legislation. This legislation cripples appraisers who have spent their whole life building a business and providing service. Please vote to repeal this legislation.

In many cases, lenders need a professional, independent appraisal of the property you want to buy or refinance to ensure that it is worth at least as much as they are being asked to lend on it. If you are making a smaller down payment and have a lower credit score, the lender is going to be even more interested in making sure the property that will be collateral for the loan is worth lending the amount requested.

If you are in the beginning of the process and wish to get a ballpark figure on a particular property you may wish to try .  I have a similar feature on this web site; go to   If you are purchasing you can rely on the feedback from your realtor.

The appraiser will form an opinion on the probable market value of the property considering sales of similar homes in the area among other factors. He or she will prepare an appraisal report explaining the conclusion. The appraisal belongs to the lender considering lending money with the home as collateral. Often, you can receive a copy of the appraisal either as a courtesy or in keeping with state law. Let us know you're interested and we'll help.

The lender wants to know first of all whether the property is worth at least as much as the loan amount. In the unlikely event the lender would have to foreclose, it wants to know it should be able to recoup at least the loan amount. But if your loan program depends on you borrowing, for example, 95 percent of the property's value and no more, the appraisal can impact your eligibility for the loan that's right for you. In a "close" case like that, the best solution is almost always to increase your down payment, or we can help find another solution such as another loan program that works.

An appraisal can cost from $350 to $500 or more for very complex properties. You as the borrower repay the lender for its cost in paying the appraisal fee upon settlement of the loan.

If you have an FHA loan, we can call a local appraiser and get a feel for the market although what they can tell us is limited to recent sales. It is important to know the specific amenities of the home because these items will create adjustments to comparables.


REPEAL THE Home Valuation Code of Conduct: Which now applies to FHA loans

The Home Valuation Code of Conduct is Legislation that Should Be Repealed

Three advantages I have as a mortgage broker over a large bank are speed, pricing and service. If you really think about it, those are the three components that separate any service business from another. The recently implemented Home Value Code of Conduct (HVCC) legislation has succeeded in worsening speed, pricing and service received for any individual obtaining mortgage financing. The HVCC will also succeed in putting many small business owners, (real estate appraisers) out of business. This change in the way banks do business stems from guidelines set by New York State attorney general Andrew Cuomo. HVCC guidelines do not apply to FHA financing where a borrower typically borrows 96.5% but only applies to Fannie Mae and Freddie Mac financing where the borrower typically borrows 80% financing. (You would think it would be the other way around)


The Home Valuation Code of Conduct (HVCC) is legislation that passed in March 2008 and became effective on May 1st, 2009. From that moment forward all real estate appraisals for Fannie Mae and Freddie Mac mortgage loans are now ordered through the bank’s appraisal management company rather than by the mortgage originator. The intent of this legislation is to prevent “persuasion” coming from the mortgage originator on the value of the property.  Prior to this, a financial institution would call up their favorite appraiser and place the order. What’s the big deal you ask? Here are examples of how this legislation, raises price for the consumer and lowers service levels and will help to effectively put many small business owners out of business.  


Appraisers, like mortgage people or realtors have been struggling for the last several years due to the difficult market. This legislation effectively takes away 40% of the appraisers business. I have known appraisers who have done a fine job for 25 years. They focus on service and doing the job in a timely manner and being as accurate as possible. Now their base of repeat customers can no longer call them up and use them on a Fannie Mae or Freddie Mac transaction. How would you like it if you were an AC technician and you had 200 customers, then one day the state tells you that you no longer can visit those people unless the compressor company sets the appointment for you. Twenty-five years of hard work and customer service has just been thrown out the window.


The Home Valuation Code of Conduct raises costs to the customer and reduces the appraisers pay and creates inefficiencies. Where $350 used to be the going rate for an appraisal now the cost is $400. The appraisal management company skims $100 of the top just for picking a random appraiser. If the bank tries to honor the old price, this means the appraiser who once made $350 per job is now making $250 per job. Now we are more likely to have a less experienced appraiser, who doesn’t care about service because there is no link between doing a fine job and his next order. He is less likely to put as much time into the job because he is getting paid less. Turn around times which used to be five days are now two weeks. This may force the mortgage broker to extend the lock which costs the consumer even more money and frustration. Just last week, I had a purchase where the sloppy appraiser misread the contract price. I had no way of telling him he made a mistake. The bank never fixed the mistake and it cost my client an additional $800 out of pocket. Under the HVCC, if a customer chooses to switch lenders, they have to start all over and pay for a brand new appraisal from a different random guy. It used to be we could transfer an appraisal from one bank to another if we found a better interest rate for the customer.


There is a petition going around that is a protest to this HVCC legislation. Please sign it on line. I have placed it on my web site and I am also placing it at the bottom of this article. This is just another example of how government intervention doesn’t necessarily always help the big picture. Another example of how mortgage brokers are being portrayed as the villains in this whole mortgage meltdown. Another example of how the large lending institutions, with their lobbyists, are pushing out the small business owner.


You can add your name to the petition at

Written by Preston Ware
Equity Source Home loans
Tel: 561-329-0075
Email is




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