FHA Says No Way to The HVCC!
(FHA) Commissioner David Stevens assured to NAMB in a meeting on 08/24/09, that FHA is not considering adopting the Home Valuation Code of Conduct (HVCC). However HUD is looking at alternatives to the HVCC that will insulate appraisers.
Mortgage Brokers and Real Estate Agents are seeing FHA insured loans as a better choice for their Borrowers and Buyers. FHA is benefiting from the controversial HVCC and all the regulations it’s bringing to the market place. The total dollar volume of FHA mortgages exceeded $31.5 billion dollars in a two month period. FHA continues to grab more market share across the nation.
Thursday, August 27, 2009
Thursday, August 20, 2009
Droppings Happen
Recently, I completed an appraisal on a large custom home. It was really fun to see all the different features and the excellent quality of this gigantic luxury home. As the Realtors say it had “too many features to mention."
While this house was an example of the best the market could offer, down the street was one of the worst. It was a large, partially finished home, sitting vacant. It had been framed and covered with sheathing. I would imagine the builder had over $700,000 in costs in this home, particularly if you added in the value of the lot and foundation. Apparently, business had gone bad and the builders spec. homes were not selling. Interest costs had eaten up the profit. The bank refused to continue to give the builder draws so the worked stopped on the house and it sat vacant for almost two years. Eventually, the builder went bankrupt and the house was left to sit unfinished and open to the weather. In time, another builder developed interest in the house and decided to visit the property for an inspection. He did an estimate to cure the weather damage and take the existing improvements to a finished stage. He decided against taking on the project because there was so much Pigeon feces in the home. The cost of cleaning up the droppings and the ongoing liability made the project unfeasible. I asked myself several times, why didn't the bank close up the house and put a roof on it? It would have been inexpensive, and it would have protected their investment. In time, the weather will even damage the heavy concrete foundation, then the house will be worth less than the lot value because it will incur the costs associated with demolition. What a waste, all due to a lack of foresight and experience.
While this house was an example of the best the market could offer, down the street was one of the worst. It was a large, partially finished home, sitting vacant. It had been framed and covered with sheathing. I would imagine the builder had over $700,000 in costs in this home, particularly if you added in the value of the lot and foundation. Apparently, business had gone bad and the builders spec. homes were not selling. Interest costs had eaten up the profit. The bank refused to continue to give the builder draws so the worked stopped on the house and it sat vacant for almost two years. Eventually, the builder went bankrupt and the house was left to sit unfinished and open to the weather. In time, another builder developed interest in the house and decided to visit the property for an inspection. He did an estimate to cure the weather damage and take the existing improvements to a finished stage. He decided against taking on the project because there was so much Pigeon feces in the home. The cost of cleaning up the droppings and the ongoing liability made the project unfeasible. I asked myself several times, why didn't the bank close up the house and put a roof on it? It would have been inexpensive, and it would have protected their investment. In time, the weather will even damage the heavy concrete foundation, then the house will be worth less than the lot value because it will incur the costs associated with demolition. What a waste, all due to a lack of foresight and experience.
Wednesday, August 19, 2009
Market Conditions Addendum FAQ
FNMA added a new appraisal requirement called the Market Conditions addendum. Appraisal reports are often ordered as 1004MC. They also published some FAQ and answers to help us implement the change more easily. See FAQ here.
HVCC changes
HVCC has been tough on a lot of appraisers. I, personally, lost a large chunk of my client base because of HVCC regulations. So now, I must say, if I had diversified my client base I would not have been hit so hard. Yes, diversity is good, and the change brought about by HVCC is proof positive. It reminds me of a time in 1997 when I tried to diversify by starting a garbage business. We purchased a new truck and went to work. Nothing is more stable than garbage… Right? That year we were running our still small route and realized that we had not properly fastened the compartment that held the compacted garbage. As we added garbage, the big back door started to push open, little by little, and we could not get it closed again. Disaster was eminent, and some poor guy was about to have a truckload of garbage dumped in the street in front of his home. My old boy Scout training kicked in and I got a roll of duct tape and a blue plastic tarp. We taped the tarp in place and wired the door so that it wouldn't open any more. As we headed to the dump we laughed all the way imagining what would happen if we dumped garbage on the freeway. Then, there would be news helicopters flying overhead showing video of our mess. I am happy to say that we made it to the dump and never had that problem again. Diversifying our business is tough. Changes causes problems: some unforeseen, others due to a lack of experience. HVCC is a fact, and some of us are slow to change our business practices, but change we must. Business is out there. We just need to find it.
Friday, August 14, 2009
NAR asks for a HVCC moratorium
National Association of Realtors reports that they have asked for a 18 month moratorium on HVCC to take time to evaluate it and fix it. See the article here.
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