Always Have a Contingency!
The HVCC dictates a hands-off policy for lenders and brokers. Thus, we can no longer choose the best appraiser for the neighborhood, talk to the appraiser, or even discuss comps with the appraiser. Because of this ridiculous HVCC rule, we are seeing a lot of bad appraisals. And one of the worst results can be a lower value when the market actually still supports the higher value.
Just this week, I have seen the following deals blow up and need to be re-worked:
1. Refinance – original appraisal was $560,000. We had to order new appraisal under HVCC rules. New appraisal value, $450,000!
2. Purchase – Purchase price: $440,000. Appraisal value: $410,000 – after waiting 12 days, the appraisal finally came in one day before the proposed settlement date!
3. Purchase – Purchase Price: $280,000. Appraised value: $265,000.
Agents, please do not exclude financing contingencies. It does not matter what any lender tells you – we all have to work under the same rules for conventional loans (and some lenders are starting to require HVCC for FHA now too!). This is a reality that is affecting all of us everyday. This is a reality that will affect you too!
Under the new rules, it is imperative that you put the financing contingencies back into contracts. To not have a financing contingency is gross negligence in your implied duties of care with your written agency contracts. Please remember to protect your client!
And while we are talking about this subject, please go here, and let your voice be heard! http://www.hvccpetition.com/