I am working on an interesting loan that will make for a good case study someday, and I think homebuyers and Realtors will find it interesting too.
I am doing a loan for a homebuyer to buy a single family detached home in Falls Church, Virginia. The sales price was a little over $500,000 and the new loan is a Conventional Fixed rate 80% loan-to-value loan, which of course means we are subject to the HVCC rules. So I ordered the appraisal from the bank’s Appraisal Management Company (AMC).
For once, the appraiser was local, from Falls Church, VA so we all figured this appraiser would know the local marketplace and that we would be getting an accurate and fair appraisal. But the appraisal came in several weeks later at a price approximately $35,000 lower than the sales price. The seller was angry, the Realtors were upset, and the buyer was confused.
I challenged this appraisal, sent in new comps to support our challenge along with a narrative explaining why we thought we were on solid ground and why we thought the home was worth the contract price. But our challenge was rejected.
We tried a second bank, and a second appraiser, since we were firmly convinced we got a bad deal from the first appraiser. The second appraiser was from Cumberland, MD! How in the world did an appraiser from almost 140 miles and 3 hours away think he knew the Falls Church, Virginia marketplace for real estate?!
To our astonishment, the appraiser used solid comparable homes, and the appraisal came in at the contract price, and we will be going to settlement soon.
But this was another HVCC accident waiting to happen, and another reason that the HVCC rules need to be changed, halted, or stopped! We got lucky that the Cumberland, MD appraiser somehow found very accurate comparable sales in Falls Church City, VA. What if we had the same fate as the first appraisal? The whole HVCC system needs to be revamped to avoid appraisers who are on the verge of going out of business from taking business way outside their marketplace in a weak attempt to scramble and raise cash to pay the bills. The consumer deserves a more professional assessment, and the whole industry deserves more accuracy and responsiveness.