Sunday, January 17, 2010

Do the new appraisal rules bring down housing value?


Do the new appraisal rules bring down value?

Starting Feb. 15, mortgage brokers will no longer be able to order appraisals on loans insured by the Federal Housing Administration (FHA). For consumers, that is supposed to mean home appraisals will more closely reflect a home's value. The reason: Brokers who may profit from a loan being approved won't also be choosing appraisers, who may feel pressured to declare a higher value.

The rule means brokers, Realtors and loan-production staff — anyone who stands to earn a commission based on the value of the transaction — can't hire an appraiser. Instead, lenders are turning to third-party appraisal management companies that typically hire appraisers on contract to do the job.

These rules are designed to ensure appraisals are impartial — are resulting in excessively low home values, because chosen appraisers aren't as experienced or as familiar with local markets. They also say the appraisers take more time, causing delays in getting appraisals done.
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