One of the big problems during the housing bubble occurred when buyers and sellers were getting inaccurate or inflated appraisals. In many cases, the relationships between lenders, realtors, and appraisers became a little too cozy causing fraud to occur. A lawsuit brought on by New York State Attorney General Andrew Cuomo against Washington Mutual put an end to those relationships through the creation of HVCC or Home Valuation Code of Conduct.

The HVCC forces lenders to use appraisal management companies to handle appraisals versus the local relationships where one party can help out another. These appraisal companies are comprised of independent appraisers from all over the country. Since the appraisers are not familiar with the area, they will use computer models that incorporate distressed sales into the appraisal. The problem with having someone from another part of the country conducting the appraisal is that they don’t know the intangibles that can increase the overall value of the home.

Can you imagine almost having a deal closed and the appraisal coming back much lower than you expected? That has been happening, adding even more challenges to the real estate markets. Leave it up to the regulators to allow corruption to occur over a number of years and then go too far on the regulatory end.

If you are going through the buying/selling process, make sure that you have a good handle on the appraisal value of the home. Surprises at the closing table are not fun.

Tags: Andrew Cuomo, appraisers, Bob Brooks, corruption, Deceptive Money, fraud, Home Valuation Code of Conduct, Housing bubble, HVCC, lenders, New York State Attorney General, Prudent Money, real estate markets, realtors, regulators, Washington Mutual