Storm Brewing Over Hawaii Property Valuations
Whether a property owner is seeking a loan modification, pursuing a short sale, or the property has already been foreclosed on, the determination of value is key to the success of each of those transactions.
Now a storm is brewing between appraisers and Broker Price Opinion (BPO) professionals vying for valuation work for short sales conducted through the Making Home Affordable Foreclosure Alternatives (HAFA) program.
Hawaii is a State where real estate agents are prohibited from receiving payment for BPO’s (so I am not sure why BPO’s are used). However, it is true that a BPO is less expensive than a professional appraisal and that may have something to do with the banks policies.
This short sale rim home (MLS# 227307) listed above had a compelling offer of $585,000 submitted. But, the banks BPO came in at 640,000 and the buyer walked away.
The Appraisal Instituteâ€”a trade group that represents appraisersâ€”released a public letter it wrote to Treasury Secretary Timothy Geithner on Tuesday, calling for an end of the practice of using BPOs for Making Home Affordable modifications and refinances, as well as amending the rules for the upcoming HAFA program to require appraisals to determine value for government-incentivized short sales. Seasoned short sale agents like myself are looking forward to the HAFA program to bring a new efficiency and streamlining to what has been a long drawn-out process of a short sale.
â€œGenerally speaking, real estate agents and brokers are not independent or properly trained valuation specialists. They have an inherent bias towards quick results and action which produces a fee for themselves irrespective of whether the lender/services/investor/property owner/borrower gets a fair return on the short sale,â€ the Appraisal Institute said in its letter.
â€œWe believe that such conflicts can and should be mitigated by implementing basic requirements reestablishing independence and competency in the valuation process,â€ the letter also said.
Specifically, the Appraisal Institute called for the short sale process to include appraisals conducted under the regulations outlined in the Uniform Standards of Professional Appraisal Practice (USPAP).
I’m hopeful that this letter finds resonance with the government agencies . Many buyers, sellers, and agents have been frustrated by short sales that have blown up from an inaccurate BPOs.Â It’s also good for the appraisal business which has been greatly softened due to the contracting of the numbers of transactions in each market throughout the state of Hawaii.
HAFA (Home Affordable Foreclosure Alternative) is set to launch on April 5. It provides monetary incentives for borrowers, services and lenders to who complete a short sale under the programâ€™s terms.
Learn more about the short sale process if you are interested in purchasing a distressed property on Kauai