Byline: KEVIN TURNER
Since May, it's been a lot harder to be a real estate appraiser, according to Paul Jarnutowski.
The problem hasn't been the recession, as much as a controversial new code of conduct adopted by the appraisal industry on May 1. Many real estate agents and mortgage brokers don't like the new code either. Many even claim the code has resulted in slowed-down appraisals to the point of constraining the housing market.
"My labor has gone from myself and three appraisers to myself and one other," said Jarnutowski, who owns Appraisers Plus on Beach Boulevard.
The Home Valuation Code of Conduct was intended to protect the consumer. It's a change in standards for mortgages that government-backed Fannie Mae and Freddie Mac will accept. It came about in reaction to widespread reports of collusion between realtors, mortgage brokers and appraisers that inflated house sales prices to astronomical levels during the real estate boom. Those inflated prices left many homeowners owing more on their mortgage than their home's worth, a condition known as being "under water."
The code, brainchild of the New York attorney general and officials with the Federal Housing Finance Agency, Fannie Mae and Freddie Mac, was intended to "improve the reliability of home appraisals," according to an agency news release.
"The code strikes a balance of assuring enhanced protections for appraisers, while maintaining lender ability to address unprofessional appraisal practices and to perform quality controls on appraisals received," said agency director James Lockhart in the release.
Realtors and brokers now have nothing to do with selecting appraisers. Generally, banks now contact appraisal management companies, which dole the work out to appraisers.
But the cure may have created its own disease, Realtors, appraisers and brokers say. And for buyers and sellers, it can mean waiting longer for appraisals to get done, critics say - which can lead to nullified contracts.
The standard applies only to mortgages held or backed by Fannie Mae or Freddie Mac - about two-thirds of mortgages - but the real estate industry is reacting as though it applies to all loans.
Furthermore, Jarnutowski said it has degraded valuations and punishes a profession that is licensed and certified and sworn to uphold standards, because a few broke the rules in years past. Also, many appraisers now are expected to perform appraisals more quickly and for less money, he said.
As Jarnutowski has seen much of his business go to management companies, appraisals that used to net him about $400 each now generate as little as $90 to $100 from a management company. Much of his direct business now comes from attorneys in divorce cases and from people protesting their property tax assessments, he said.
While critics of the code of conduct abound, its advocates say it protects against inflated appraisals that could be detrimental to consumers.
Realtor Andy Fletcher of Prudential Realty Network Mandarin/St. Johns said he's reserving judgment on the new code. He said appraisers now are working harder to do a careful job, and that could be what's led to lower appraisals.
"They're so used to appraisers rubber-stamping," Fletcher said. "What's changed is the process of how an appraiser is chosen. Now, no agent or loan officer has any contact with them. It's a new process. We're seeing changes in every aspect of real estate."
The National Association of Realtors has taken a stand against the code, saying 70 percent of its member Realtors say out-of-area appraisers have been used and that management companies are rushing the appraisals. And they said sales are being slowed by it. …