What is HVCC?

Posted by Phil Boren on Tuesday, May 5th, 2009 at 10:23pm.

HVCC sounds like a very common construction component of many homes and businesses, right? It's anything but common and has nothing to do with construction. In an attempt to solve a perceived problem with the way appraisals have been ordered and ultimately with perceived appraiser independence, federal regulators have implemented a new regulation effective May 1, 2009 referred to as HVCC, or the Home Valuation Code of Conduct. If it survives in its present form, it will fundamentally change the way appraisals are ordered, and many believe that the "cure" is far worse thatn the perceived "disease".

The time-honored practice of a local lender hiring a local appraiser to estimate the value of a local property, will disappear under the new HVCC. The lender will have to place the order with a third party, an AMC, or Appraisal Management Company, who will turn around and order the appraisal from a "pool" of appraisers who may or may not be local. In fact, it will not be uncommon for a Denver appraiser, for example, to be selected to value a Boulder or Longmont property. Not that the Denver appraiser is unqualified, but where's the common sense in hiring someone to value a property that's outside their area of expertise?

This new regulation appears to be another knee-jerk reaction, and may proove to be a move in the wrong direction for the real estate market. Appraisers are trained to study and evaluate their local market(s), to maintain their independence, and to support their opinion of value - in writing. Time will tell whether adding layers of governmental red tape will improve the system, but it is likely to impact a lot of transactions going forward.

Phil Boren
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Email: pboren@remax.net
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