New appraisal rules demand Buyer & Seller caution
Thursday, September 18th, 2008A controversial agreement between New York Attorney General Andrew Cuomo and Fannie Mae and Freddie Mac with respect to real estate appraisals is not set to take effect until January 1, 2009. However, lenders are already starting to adopt aspects of the pact. The agreement was intended to provide safeguards that will ensure appraisal independence and more reliable valuations. Notably, it prohibits using appraisers selected by local mortgage professionals or in-house appraisers in favor of those who are “independent.”
To the extent that it prevents interference with the appraisal process and inflated valuations will be a good thing. As a buyer expect to pay for your appraisal up front and if you decide to switch lenders later, expect to pay all over again for a new one. Many in the mortgage industry are unhappy that the agreement was struck without the usual input from federal regulators and industry groups. Fannie Mae and Freddie Mac asked for comments and there may be some modifications before the stipulated January 1 start date.
Nonetheless, many lenders are forging ahead, wanting any kinks to be ironed out before next year. Some lender/investors are using past appraisal problems as an excuse to review appraisals during the underwriting process and insist on adjusted (lowered) valuations, which can throw sales contracts into turmoil.
Buyers and sellers need to be aware of the new appraisal reality. More than ever, appraisals are not final until underwriting approval. Buyers should be wary of lifting any appraisal contingencies and Sellers should be prepared to deal with last-minute snags.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Finance®
..more comments on these new appraisal rules
Brent Mendelson, Choice Finance®
