Chapter 18: Appraisal Process (Mandatory Thread) In the normal course of the marketplace, a consumer will purchase a product or service and the retailer has the right to set a price. There is virtually no negotiation on price between the retailer and the consumer. The real estate marketplace operates in a significantly different manner with the seller setting a price. The buyer and seller negotiate and reach agreement on price. Why should the parties to the negotiated agreement bring in the third party (appraiser) to independently and impartially prepare a written statement expressing an opinion of defined value? Secondly and equally important to this discussion (in response to the 2008-2009 mortgage crises), new appraisal rules-The Home Valuation Code of Conduct (HVCC) went into effect. The appraisal rules have been evolving since the mortgage mess of 2006-2008 and now the HVCC has been superseded on July 10, 2010 with the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act. What has been the long term impact of on going changes to the appraisal process? As part of this discussion thread, you are required to contact a local appraisal company to determine the impact of both the old HVCC and the now in effect Dodd-Frank Wall Street Reform and Consumer Protection Act on the home buying process. In your discussion with a licensed appraiser, ask questions as to the impact of the HVCC and Dodd-Frank Act have had on their career field and ask questions with regard to educational and licensing requirements to become a licensed appraiser–be aware that each of the 50 states and other US Territories has state specific licensing requirements.

Appraisal Process

It is typically important that a well-educated and professional appraiser be involved and communicates his or her evaluations as this will be significant and meaningful to the client thus avoiding all misleading data engaged within the marketplace. This fall under the uniform standards of professional appraisal process that indicates the current rules of the appraisal profession (Fu et al. 2014). The significance of the role of the appraiser places legal obligations on those who operate in the same capacity. These rules engage explanatory comments and start with an ethics provision setting forth of the needs for integrity, independent judgment, and ethical operations. Moreover, the laws include a competency provision that puts an immediate role on the appraiser before acceptance to the task.

Among the several regulatory guidelines documented in the act is the modern game scheme for the appraisal procedures with the primary intention of ensuring that home appraisals are done accurately and realistically while avoiding untrustworthy brokers from pressuring appraisers. However, the long-term impact on the continually changing appraisal process has resulted into to several lenders outsourcing the whole process to the appraisal management organizations while others are hiring out-of-area appraisers and paying them at cut rates. These have in turn led to sloppily inaccurate appraisals carried out by appraisers who are unfamiliar with the local market (Fu et al. 2014). Before the Dodd-Frank Law, the appraisal process was the most currently regulated by the conditions and terms of the 2009 home valuation code of conduct that strategically needed that mortgage lenders apply a third party while acquiring an appraiser to carry out an appraisal.

Reference

Fu, Y., Xiong, H., Ge, Y., Yao, Z., Zheng, Y., & Zhou, Z. H. (2014, August). Exploiting geographic dependencies for real estate appraisal: a mutual perspective of ranking and clustering. In Proceedings of the 20th ACM SIGKDD international conference on Knowledge discovery and data mining (pp. 1047-1056). ACM.