New rule meant to keep home values in line
Center for Personal Finance editors
McLEAN, Va. (1/20/10)--Gone are the days of lenders inflating home values to underwrite loans. Starting Feb. 15, mortgage brokers/lenders no longer will be able to order appraisals on loans insured by the Federal Housing Administration (USA Today Jan. 11).
Instead, lenders will turn to third-party appraisal management companies that hire appraisers on contract to do the job.
The new rule is supposed to help ensure that lenders don't pressure appraisers to inflate home sales, but critics argue it could make things worse.
The Appraisal Institute and the National Association of Realtors say the change could be harmful to consumers and appraisers alike. Their concern: It could result in appraisers being assigned to unfamiliar areas, resulting in low appraisal values. It also could mean the appraisal process would take longer than before the rule.
The trade association of the real estate settlement services industry--The Title/Appraisal Vendor Management Association--argues that third-party appraisers are well-qualified and if appraisals come in low it's because home prices have fallen.
If you're in the market to buy a house, keep in mind that the appraiser will look at:
Positives and negatives of property location--How close are schools? Is street traffic heavy? Is there a park nearby?
Convenience of floor plan;
Quality of materials and workmanship that went into building the house; and
Updates and extra features such as a remodeled kitchen or larger garage.
The appraiser also will compare the property you're looking at with similar properties that sold recently in the neighborhood.
To find out more about the appraisal process, read "Appraisers Home In on Value" in the Home & Family Finance Resource Center.
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