The Home Valuation Code of Coduct

The recent release of the revised extremely controversial Home valuation code of conduct still leaves many questions unanswered and many businesses and appraisers in the dark to whats really going to happen when the code is enforced.

From the revised code the lender will have to order the appraisal and the broker will have no say in the choosing of the management company or the appraiser this is very clear. However there are no procedures for getting an appraiser or a management company approved with the lender which leaves some questions to what is really going to happen? The majority of large lenders have business relationships with appraisal management companies and they have set-up joint ventures to share profits. These joint ventures have become cash cows for these lenders and a new revenue stream for them. But if the big lender have JV's with one company then how will a new company get approved with that lender?

The next question is. Are these JV's illegal and should they be? Essentially you have an appraisal company owned by the lender charging the company for an independent appraisal that they make money off of.

Example:
Countrywide has a business relationship with Landsafe. If you get a loan through Countrywide Landsafe will do the appraisal. You pay Landsafe $500 for the appraisal. Landsafe contracts a local appraisal to do the work and pays them around $200 for the appraisal profiting $300.00. The question remains is why couldn't the homeowner find an appraiser on there own and pay them $200 to do the appraisal and save $300? Now given with the turmoil of the real estate market there should be a review process in place but that still does not justify such a above market charge and upserd profit margin. Also if the homeowner wanted to spend $500 on an appraisal why cant they go and hire an highly qualified appraiser do to the appraisal independently for $500? Is it disclosed to the homeowner that the appraiser was only paid $200 when they were charged $500?


More practical example:
Imagine if you owned a Toyota, and Toyota informed you can no longer use your local mechanic to service your car, but only there Toyota service. You agree and take it to Toyota dealership and they charge you $500 to do the work. You later find out that Toyota didn't repair your car but the contracted the work to your local mechanic paid them $200 and profited $300 for something you could have got done cheaper by yourself by the same person... IMAGINE!!!!Well that's true with most of these companies.


The purpose of a vendor management is to manage the process effectinetly for the lender not make huge profit by finding the cheapest vendor. The more you pay the better quality of work you will receive. There is nothing wrong with having contracted appraisers do work for you and making money off that. The only problem is when this is mandatory! This is not a communist country however by mandating the use of a company that uses independent contractors and charges consumers much more for an inferior product is a disgrace to the industry and the country.

Appraisal management companies are to ensure the appraisal is done professionally, properly and to meet the guidelines of that lender. They should profit from this and have just as much legitimately as any other business. They should be set-up to service the appraisers and the lenders they should be a resource for the appraisers and a safekeeping for the lenders. Appraisers should want to work with them. Not just work with them because they have to and because the lender mandates it or because they cant get work anymore else. I envision a company that makes both work. Where lenders and appraisers enjoy the relationship and ensure that business is done properly, ethically and professionally. Coester Appraisal Group will be that company. We will be the next generation of appraisal management where we have the best appraisers and everyone wants to work with us. Where appraisers are paid well and they do a great job. Where lenders are delivered a superior product and a customer service system to assit them with there process. This will be my company.


Its seems the whole industry is going to a monopolized industry, but i really do think that the HVCC is not going to go through. They just cant regulate everything in the world. They are creating so much rules that its almost impossible now to really enjoy the great business of appraising homes and running a business. The real estate market place itself is one of the best markets to be in and it will always be but they do not and should not regulate it to the point where its impossible to get anything done and that you have to use the appraisal company that has a business relationship with the lender to get work. The days of the Good ol' boys club were over in the 1980's and should never return.