For many folks, trying to close a real estate transaction these days is no simple feat. In fact, Bend-based mortgage broker/banker Larry Wallace of True North Mortgage recently polled a group of real estate agents, escrow officers and appraisers and asked them how many of their 30-day deals that required loans are closing on time. The response? 10 percent.
Not a very encouraging number.
In fact, the problem has become so prevalent that Wallace spearheaded a class last week in Bend on late closings to discuss what’s causing the delays and what to do about it. In many cases, Wallace said, several factors are to blame –- and are often beyond our control.
The problems arise out of changes in both the home appraisal process and the home loan underwriting process -– both of which used to involve fairly straightforward timelines that could be charted pretty simply. But that was then (before the mortgage melt-down), and this is now.
Assessing Appraisals
One of the biggest potential problems in determining your timeline can be attributed to the implementation last May of the new Home Valuation Code of Conduct (HVCC). Created in an effort to “enhance the integrity of the home appraisal process,” the revised HVCC (which applies to conforming loans backed by Fannie Mae and Freddie Mac), instituted a new system that prohibits lenders from ordering appraisals directly. Now, only a lender’s designated third-party, known as an Appraisal Management Company (AMC), is allowed to order an appraisal. The insertion of that step alone has increased the timeline exponentially (because every time anything needs to be done, the AMC must first be contacted and must initiate each new action).
This convoluted new system can complicate the process a little or a lot, depending on a number of issues. If, for example, your lender decides a second “review” appraisal is warranted, you can expect to at least double the time required. Expect further delays if there aren’t good recent sales comps nearby or if the property being appraised is on acreage, has outbuildings, has additional living units and/or includes unpermitted components.
And if by chance the AMC chooses an appraiser who isn’t well-versed in the area where your property is located — and there’s no guarantee the AMC will choose an appraiser from Central Oregon — the turn-around time for that appraisal can be significantly increased because you might need to appeal that appraisal.
The good news: Rumor has it that the HVCC as we now know it may be going away. (Check out this video explaining how the HVCC code has failed miserably at its purported goal: improving the appraisal process for the buyer.
Stay tuned for PART TWO of “Will Your Transaction Close on Time?,” where we discuss how your loan may delay your closing date and provide some tips for closing on time.
About the Author:
Lisa Broadwater, GRI, CDPE is a Central Oregon-based real estate professional who specializes in listing and selling homes, especially in Sisters, Tumalo, Redmond and Bend.