NAR Releases Preliminary Report on HVCC Impact

The National Association of Realtors (NAR) released a preliminary analysis yesterday of how the Home Valuation Code of Conduct (HVCC) is impacting the housing market. As should have been expected, the numbers seem to reflect an adverse impact. I say this not only because of the numbers themselves, but because anyone who has been involved in the industry for a long time knows, when the government tries to use poorly thought out and knee jerk reaction legislation to influence outcomes, there are always unintended consequences.

The analysis of the report, "using a statistically representative survey of the membership" according to Jed Smith, Managing Director, Quantitative Research, showed the following:

• Approximately 76% of Realtors® representing buyers or sellers indicated that the time to obtain a completed appraisal increased after May 1, 2009.
• Lost sales were reported by 37% of Realtors® attempting to complete home sales, with 17% reporting one lost sale and 20% reporting more than one lost sale.
• An increased use of out-of-area appraisers was reported by 70% of Realtors® seeking to complete a sale.
• NAR appraiser members reported a significant number of assignments in unfamiliar geographic areas: for example, 16% reported that more than 11% of their assignments were in unfamiliar areas.
• Approximately half of NAR appraiser members reported a reduction in fees received by them, and 70% of NAR appraiser members reported that consumers were actually paying higher fees.
• Approximately 85% of NAR appraiser members reported a perceived reduction in appraisal quality.
• Among Realtors® respondents obtaining an appraisal for a client, 55% reported a perceived decrease in appraisal quality.

As lenders, we can also confirm that our experience has been a reduction in appraisal quality and the overuse of appraisers in unfamiliar geographic areas. Fortunately for us, having an underwriter in-house and access to the MLS through our sister real estate firm, we have not had any loans fallout due to valuations. However, we have had more than our fair share of questions regarding just how accurate the appraisals truly are using this new HVCC system.

I'm curious to hear what some of our REW members experiences have been? So, if you've got a story to tell, please let us know.