Three months ago, new rules for appraisals, called the Home Valuation Code of Conduct, have driven up the cost of appraisals for borrowers trying to buy a real estate property. An appraisal that used to cost $275 to $300 now costs $375 to $500 under the new policy. That’s because buyers are now paying a middle man to work between the mortgage broker and the appraiser.
The Federal Housing Finance Agency sasys this new code is necessary to make sure homes are appraised correctly and fairly. Before the code went into effect, mortgage brokers could choose their own appraiser, and appraisers could be transferred from one lender to another. Now, if the buyer wants to try a different lender, they must pay for a second appraisal. The appraisal remains with the lender, not with the broker.
Before the code went into effect, many appraisers felt pressure from a mortgage broker to produce a desired value on a property so that the escrow could close. Appraisers were afraid they might lose business if they didn’t produce a certain value. Now, mortage brokers are no longer able to order, select, or pay appraisers.
Whatever lenders or appraisers think about the new code, it is a good start to addressing the practices of appraisers’ valuing properties higher than they were really worth. More accurate appraisals will protect buyers, the potential real estate property owners, and produce prices that are more realistic for the home buying market.