Monday, June 15, 2009

Appraisal Rule, Closings, & First Time Buyers Tax Credit

The May statistics are in and the new appraisal rules certainly affected the number of closings in May in Denver. Of course they were not the only reason closings were down but I will give them a 10% fewer closings due to the guidelines the appraisers and the loan officers must abide by. See below for more on those rules. Here is the chart for sales May since 2001. You can see the drop in demand.

One of the other factors that affects the number of sales is the number of homes on the market as most folks sell and then buy. As the number of listings on the market falls it could predict the future health of the market...more listings=less healthy; fewer listings= more healthy. So I see the drop in active listings, year over year as very good for the market and indicating upward pressure on price in the future. Many folks have hunkered down and are awaiting a market turn before putting their homes on the market. National events certainly effect our personal perceptions of what is happening. Here is the chart for new listings entering the market.

The new APPRAISAL RULES and what they could mean to you...refinancing or buying a home:
The long and short of the new rules are that the loan officer cannot talk to the appraiser, and the loan company cannot hire their own appraiser over and over. There is supposed to be a wheel to assign appraisers to files. That said the cost of the appraisal has gone up as there is now a 3rd party Appraisal Coordination Service (ACS) who has created the wheel and is supposed to assign an appraiser. This part is working fairly smoothly at this time.

Interestingly, the Realtors are NOT prohibited from speaking to the appraisers, only the loan company, and frankly I have only investigated a very narrow spectrum of these rule.

One other thing the new rules have caused; a price increase to pay for the Appraisal Coordination Service, so instead of $350 an appraisal might cost $400.

It seems the "wheel" could be problematic in that an appraiser from Greeley could be assigned to do an appraisal in Pueblo in spite of the fact the appraiser has never seen Pueblo and does not know there is a Pueblo West too. And I would not want a city of Denver appraiser doing a farm & ranch appraisal in Newcastle either. SO when you are getting an appraisal, there seems to be a couple of questions you might wish to ask the appraiser, BEFORE they start the process and finish spending your money.

Where are you located?

When was the last time you did an appraisal in this area?

How many appraisals have you done in this neighborhood?

The final item today that may have "slowed" the number of sales in May was the premature announcement by HUD that the $8000 tax credit could be used as down payment. The details of this proposal are still being worked out and the result is that quite a few buyers are sitting and waiting for the "OK" to go. A shame in that a loan from Grandma could get the job accomplished the same way. Talk to me or your lender of choice before you make a decision not to proceed. As John Wayne said in the movie The Cowboys 'we are burning daylight!'. Do not let this opportunity pass due to lack of action on your part. We are talking about up to $8000 of free money for the first time home buyer here.

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