The Anna Maria Island Sun Newspaper

Vol. 9 No. 43 - July 15, 2009


Home Valuation Code causes problems

If you think with the right side of your brain and consider business dull and art an adventure, you’ve never met a real estate appraiser, at least the way real estate appraisers once were. Since the Home Valuation Code of conduct was adopted on May 1, real estate appraisers, who once thought with both sides of their brains, are now thinking with only one.

The Home Valuation Code of conduct is the result of a joint agreement made in March 2008 between the New York Attorney General Andrew Cuomo and Fannie Mae and Freddie Mac. The code prohibits lenders and third parties from influencing or attempting to influence the development, result or review of an appraisal report. The code applies to financing for single family homes that are backed by Fannie Mae or Freddie Mac. These types of loans represent about 70 percent of the home loan market.

According to the Wall Street Journal, "The code bars loan officers, mortgage brokers or real estate agents from any role in selecting appraisers. This has encouraged lenders to outsource the selection to appraisal management companies, or AMCs which take a sizeable cut of the appraisal fee."

Two months down the road, the national and local real estate markets are starting to feel the impact of the code of conduct. Appraisals are coming in unusually low, frequently because the comparable sales used include foreclosures, short sales and distressed sales, which are skewing the value of other homes in the area. The consequence of this is contracts for sale, which invariably have a mortgage contingency included, are falling because potential buyers are not being approved for financing based upon the agreed upon sale price.

This is happening across the country as stated by Lawrence Yun, an economist with the National Association of Realtors. He points out that the danger of a delayed housing recovery and more potential foreclosures is very real because of appraisal problems.

As a result of this some, United States Congressmen are sponsoring a bill to put the Home Valuation Code of conduct on an 18 month moratorium, giving the market some extra recovery time. This measure of course has the backing of national real estate groups.

Mandating that appraisers follow a code of conduct and remain independent is in theory a commendable practice. However, what it doesn’t allow for is local knowledge. All real estate is local was never truer when you’re trying to find the correct value of a property. Knowing an area well is the single most important asset an appraiser has. In hot markets with high numbers of properties selling prices change weekly. In slow markets appraisers need to frequently go back further digging to find a comparable sale. If an appraiser is from out of the area, it’s impossible for him/her to understand every aspect of a neighborhood in order to define the correct value.

This becomes even more critical when you’re evaluating a property in a highly specialized area like Anna Maria Island. If an appraiser doesn’t know his/her "stuff" it’s easy to overlook value based on location, condition, building codes, flood areas and a whole range of particulars relative to island living. A waterfront property on the bay has a different value than a waterfront property on the Intracoastal or a canal, but they’re all waterfront.

During the best of times, evaluating property is more of an art than a science. It’s an industry that is always playing catch up, which is why now more than ever local knowledge by appraisers who are not chosen from a statewide pool is crucial. Unfortunately, the government officials who created the Home Valuation Code of Conduct are thinking with the wrong side of their brains, or not thinking at all.

Real Estate Transactions
Closed sales between March 2 and April 18, 2009

Anna Maria

523 Villa Rosa Way Single family $850,000
114 Tern Drive Single Family 750,000
160 Crescent Drive Single family 600,000
115 Maple Ave. Single family 550,000
111 Gull Drive Single family 525,000
304 Hardin Ave. Single family 515,000
801 Fern St. Duplex 326,000
9907 Gulf Drive Lot 315,000

Bradenton Beach

506 Bay Drive S. Condo $650,00
2418 Ave. C #500 Condo 375,000
2414 Ave. C Duplex 336,700
1801 Gulf Drive #207 Condo 225,000


12618 Safe Harbor Dr. Lot $475,000
4011 Osprey Harbor Lp. Townhouse 257,000
11900 Cortez Rd. W. #37 RV Resort 190,000
11900 Cortez Rd. W. #21 RV Resort 130,000
11900 Cortez Rd. W. #50 RV Resort 124,000
Address Type Price
11900 Cortez Rd. W. #8 RV Resort 121,500
11900 Cortez Rd. W. #68 RV Resort 110,000
11900 Cortez Rd. W. #77 RV Resort 86,000

Holmes Beach

520 58th St. 2 or more $1,775,000
105 49th St. Single family 750,000
6006 Gulf Drive #210 Condo 690,000
209 65th St. Single family 600,000
103 81st St. Single family 565,000
621 Emerald Lane Single family 550,000
519 75th St. Single family 416,000
104 55th St. Condo 400,000
203 70th St. Half Duplex 335,000
5200 Gulf Drive #108 Condo 315,000
313 62nd St. Duplex 300,000
2701 Ave. C Single family 225,000
3801 Fourth Ave. #3 Condo 220,000
6500 Flotilla Drive #214Condo 215,000
6804 Marina Drive Condo 215,000
6300 Flotilla Drive #99 Condo 180,000

Source: Manatee County Property Appraiser’s Office

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