The Home Appraisal Process
As Las Vegas Real Estate Agents, we are all well aware of the pros and cons of the Home Valuation Code of Conduct (HVCC) and how this piece of legislation was initially intended to insure the purity of the home appraisal process and the integrity of all concerned.
Apparently, something went amiss during the drafting of HVCC, and in the confusion, and as a direct result of HVCC’s requirements, many seasoned home appraisal professionals have been leaving the industry, primarily due to regulations which have negatively impacted their income.
It’s not the intent of this article to microscopically analyze the problem with some of the legislative negatives inherent in this bill, since there are many articles, blogs, whatever, that have addressed, and are still addressing these issues.
Basically, this article is intended to offer an overview of the appraisal process to the first-time home buyer, and to point out how important the results of this process is to all concerned; buyer, lender and realtor.
- A professional appraiser is a person who has undergone a specific educational regimen which has trained that person to have the skills and knowledge to render an opinion as to the market value of a property.
- The appraiser’s written report as to the current market value of a property, is of primary importance in the decision making processes of the property owner, prospective buyer, and lender. A negative report, for example, stating that the property is worth less than the asking price, would cause many reactions; the buyer or lender backing out of the deal, the Realtors loss of commissions, etc., Or a possible re-negotiation to lower the asking price to reflect the assessed market value.
- The appraiser’s report reflects many things that would positively or negatively impact the property purchase negotiations, such as the property’s overall condition, upscale or deteriorating neighborhood for example, number of homes in the neighborhood in decline, in foreclosure etc., or if the home is a showpiece in a neighborhood of lower priced homes, or a lesser type home in a neighborhood of more expensive homes.
Certainly, there are numerous factors that the assessor is trained to consider; however, it is important to understand that if the appraiser is unfamiliar with the area, the appraisal report could be faulty.
Under the rules established by the HVCC –which we are not going into in detail here – an appraiser not familiar with the area could be assigned to inspect a particular property on behalf of a lender, and the result may well be a flawed report.
Of course, the potential buyer could appoint an appraiser more familiar with the neighborhood in which the seller’s property is located, and if the buyer’s report, for example, differs with the lender’s appraisal report, the buyer, seller and lender could negotiate to save the deal, such as ordering a third report, and reach an agreeable compromise. The buyer and seller may agree to split the appraisal costs, etc.
However, until the issues that have encouraged experienced and competent appraisers to abandon their profession is resolved, appraisal headaches will apparently remain.