New rules are raising appraisal costs yet the quality gets worse

The rules, intended to improve the accuracy of home valuations, push most large lenders to use third-party appraisal management companies.

How about this scenario the next time you refinance or apply for a mortgage: The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.Plus, your appraisal-related charges may now be subject to add-on fees that you'd never heard of before -- $50 to $100 extra in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser. Or an extra $50 to $150 tacked on if the property is worth more than $500,000.

Worse yet, the person conducting your appraisal may be new to the field -- willing to work for a cut-rate fee -- and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.

**I have received three calls from fellow real estate agents in the past month regarding recent sales I was involved in asking for additional info to provide the bank because the appraisal was botched by somebody who was not familiar with the area. This helps create multiple appraisals and broker-price opinions.

The rules, which go by the name Home Valuation Code of Conduct, are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party "appraisal management companies" that contract with networks of independent appraisers around the country who have no direct contact with retail loan officers or mortgage brokers.

Mortgage brokers, who formerly chose appraisers and kept a competitive eye on appraisal fees, say Fannie's and Freddie's rules are adding 20% to 30% to consumers' appraisal costs.

Jeffrey T. Hawk, vice president of Maryland Mutual Mortgage in Forest Hill, Md., says a standard appraisal that previously went for $325 jumped to $400 or more May 1 when he was forced to use management company appraisers.

(Source LA Times: Full Article: http://www.latimes.com/classified/realestate/news/la-fi-harney17-2009may17,0,5903005.story