If you're in the process of selling or purchasing a home (or both), you may feel stressed about one specific point in the process -- the appraisal. Your ability to obtain financing to purchase a home at asking price will depend on an appraisal at or above this price, and a lower than anticipated appraisal on your current home can make it difficult to sell for enough to cover your outstanding mortgage. Recent reforms in banking and real estate law have changed some rules for appraisers, and these changes could have a positive impact on your real estate transaction. Read on to learn more about how one of these rule changes may impact you.
What federal law regarding home appraisals has been changed?
The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") added a number of requirements for banks and other lenders that are intended to protect consumers against unfair business practices. One of these reforms eliminated an old rule that had created a central agency through which real estate agents, lenders, and appraisers could communicate. This central agency, the HVCC, was designed to protect appraisers against undue influence from lenders to set the appraisal at a certain value -- however, in practice it implemented a number of burdensome hurdles that added time and cost to the real estate purchase process. The elimination of this agency permits free communication between appraisers and real estate agents, buyers, and sellers.
How might this new law affect your real estate transaction?
By allowing free communication between you or your real estate agent and the appraiser, this law will help you be informed of any needed repairs or other work that could be done to your current home to bump up the appraisal value. Often, the appraiser may be able to give you an estimate of how much your home's value will increase if you perform certain tasks, and you can consult with your real estate agent to determine if making these changes would be cost-effective. Even if you decline to do so, you'll have a better idea of the factors that should go into your home's sale price.
If you're buying a home, you'll have the same ability to communicate freely with your real estate agent and the appraiser. This can come in handy if you believe the appraisal is too low (preventing you from fully financing the home) or too high (causing the seller to set an inflated purchase price). You'll be able to have any questions answered by the appraiser, and can make your decision to purchase, appeal, or walk accordingly. For more information, talk with realty executives, like those at The Lion Team, to understand how to make the most out of your appraisal options.