Tuesday, July 7, 2009

New Regulation Raises Costs to Real Estate Buyers

New Regulation Raises Costs to Real Estate Buyers.
Every now and then, the government gets it all wrong. This time, they’re regulating the appraisal process and it’s coming at the expense of the consumer….again! This new regulation requires that mortgage brokers outsource appraisals to a third party company who in turn outsources the appraisal to an appraiser. The idea was put into law in April with the intent to eliminate collusion between mortgage brokers and an appraisers. Before April 2009, the cost of an appraisal on a typical 3 bedroom 2 bath home in Silicon Valley was about $350. Now it’s $500. That third party company that picks up the phone and calls the appraiser costs the consumer $150! That’s a bit ridiculous don’t you think? Oh, and one more thing, the mortgage broker cannot even talk to the appraiser, even if there’s a problem. Ironically, sometimes appraisers don’t always understand the market dynamics with prices changing, inventory on the market and so forth causing inaccurate values. If the mortgage professional calls and speaks to the appraiser, that appraisal cannot be used for that transaction. Cha-Ching, there goes another 500 bucks. And if that buyer has an FHA loan, guess what? There’s another FHA appraisal that now has to be conducted. That’s $1,000 the buyer has to pay or they won’t get their loan. But the government thinks this will solve all the real estate problems. Let’s think back to the dot-com bust in Silicon Valley earlier this decade. Who did the government blame what that time? The appraisers. They said it was the appraiser’s fault that prices got overheated. It was their fault that when there was a mini recession in hi tech, prices dropped too quickly. At that time the government said, well, let’s regulate those nasty appraisers. Let’s require that an appraiser be certified by a regulatory authority, then everything will be swell, At that time, it caused appraisals to go from approximately $150-$200 to about $300-$350. Let’s see, how did that work out? Take a look at the real estate market in 2007 & 2008 and you’ll find the answer. Is this really what we need? Sorry for the rant (but not really). www.GaryNobile.com

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