Over the last few weeks, as we’ve all become more accustomed to the new required disclosures, and our beloved TRID, but one thing that seems to have slipped under the radar till now is the sudden increase in the price of appraisals.
It wasn’t so long ago that the total cost of a regular conventional appraisal was in the $400 range. And, this was after the Home Valuation Code of Conduct (HVCC) was introduced by the government, requiring all appraisals to be ordered through an independent Management Company that would ensure anonymity of the appraiser. An equivalent FHA appraisal was around $450. We totally understand that, as it’s due for the most part to the additional inspection items that FHA/HUD require their certified appraisers to perform. HVCC of course added a middle man and they also had to be compensated, so that initial jump in costs was to be expected.
Originally, however, if you spoke to an appraiser after HVCC was implemented they would invariably tell you how little they were making out of the new increased fee, many left the business as they weren’t able to survive that initial pay cut, and others hung on hoping it would balance out. This, we’re told, has since happened and more of that fee is making its way to the appraiser.
But, since then a variety of changes have occurred, more and more stringent guidelines have been introduced, and the appraisers have had to add a number of additional requirements to their reports, such as quality of home categories, additional comp requirements, photo requirements, and the added pressure of the Fannie Mae Appraisal portal. The appraisals have steadily climbed in cost to meet these demands, but it wasn’t so significant that we couldn’t explain it to our clients; you know, those guys actually paying for the service, like it or not, and without a choice in the matter.
TRID (The Reason I Drink) came along, and some of the Appraisal Management Companies decided it would be easier to set up a Tiered Fee System. We as the originator now have to accurately disclose fees at the beginning of the transaction before we really know anything about the property, and it has to be a valid change of circumstance for those fees to be allowed to change. The Tiered pricing system means we can go into a portal, check the region, the appraisal type, the property type, and obtain the fee to add into our Loan Estimate. Handy, right?
In addition, FHA/HUD have added a whole set of additional requirements that their certified appraisers now have to address, including physically getting into the attic, and the crawl space, instead of just snapping a photo. So, suffice it to say, the FHA appraisal cost had to increase again to accommodate the additional work load.
Imagine my absolute horror when I ordered a regular single family home appraisal in down town Marysville for an FHA loan, on a normal tract home for $165,000 purchase, only to discover the cost for this little beauty was $650!! Yes, that’s right, $650 for a normal, run of the mill tract home in downtown Marysville. Not out in rural countryside, miles away from civilization, or a million dollar home with high end construction, or even large acreage, or difficult to comp multi-family property. No, this is a 1000 square foot 2 bed 1 bath home, on a regular lot in town.
Where will it end? I have no idea how to call my client, by the way in this instance a first time buyer 23 years old that is actually showing the millennials how it’s done, and tell her the appraisal to evaluate the property’s worth is $650! As costs have increased over time I’ve been able to explain the reasoning, talk about the additional work required, stipulate the benefits of having a HUD certified appraiser working on the file, and so forth. Now, well…I’m at a complete loss. How am I to justify and explain this? Back in the “old days” about four years ago, I would have been legally allowed to kick in some of our commission to help pay for the closing items, and soften the blow, but even that luxury has been taken away by our government for the so called “best interests of the borrower.” Don’t make me laugh!
It’s high time someone stood up for the real “best interests of the borrower,” and rather than minimizing choices, tightening rules to the point of ridicule, and forcing costs to increase with layer upon layer of compliance, maybe someone in government could listen. Oh, but now that I’m thinking about it, perhaps I should mention this to Donald Trump!
Suzanna Ravin has been working in the lending industry for the last twelve years, currently managing a retail branch Peak Mortgage, a division of Finance of America Mortgage, LLC. She maintains her top originator status by remaining very hands-on with her clients’ transactions. Often referred to as the Loan Guru, she loves to be completely informed on lending guidelines, and regulations.