Rumors about HVCC being repealed have begun to fly around the mortgage industry. The Home Value Code of Conduct law (HVCC) that went into effect has been the center of controversy since it went into effect in May of 2009. The law was part of the sweeping changes to keep appraisals independent from the loan officers’ influence and make sure values provided were real.

While the HVCC was a great idea the law was written so loan officers cannot have any influence on who is given an appraisal. Deanna and I had a group of 12 appraisers we used around the city, those who knew Lake Norman, Plaza Midwood, Myers Park, University/Concord and yet others that knew the South Carolina markets. The issue is the appraiser (often a licensed realtor as well) will know their specialized market better than an appraiser from another part of town much less another town. Comparables that may look the same will have different values in different neighborhoods. You have to know the area when you are assigning values.

For most Realtors I am singing to the choir – they all have horror stories about an appraiser coming from Albemarle to do an appraisal in Ballantyne Country Club and comparables being used close by but from another subdivision ending in a below value appraisal.

The reason for these crazy appraisal assignments are the use of Appraisal Management Companies (AMC’s). When the HVCC law was being passed the large banks in the county created new profit centers called AMC’s where they went out for bid for appraisal services. The appraisers are allowed to list the areas where they want appraisal assignments. So an appraiser living in Kings Mountain, NC can list Lake Norman and Charlotte on the list of appraisal assignments he would like to receive along with Shelby County (this has happened). Since the AMC’s are profit centers they assign the appraisals to the lowest bidders and the AMC then “underwrites” the appraisal and adds a “value added” fee to the appraisal which the customer pays for to get their new bank loan. The result has been appraisals that do not reflect the real value of the property.

At Cunningham and Company we approach things differently, all of our seasoned loan officers gave a list of appraisers to add to our pool of appraisers for the Charlotte (and surrounding market place) – they are paid their full fee and we do not add a “value added fee”. The result is a better appraisal product and a better chance of getting the full value out of your home or your customer’s home.

While foreclosures and short sales have affected values our appraisers are know the areas of town better than the low bid appraisals coming from the AMCs.
Keep this in mind next time you have a customer buying a new home or a refinancing your current mortgage. A great appraisal can make the difference.