A woman sits outside in the backyard of her home in the garden that she purchased with a lender using an appraisal.

One of the most frustrating and expensive aspects of our business is dealing with low appraisals.

It is frustrating because borrowers invariably blame us for the problem – even though we have very little control over the issue.

It is expensive because we often end up throwing money at the issue to assuage borrowers and agents – even though the appraisal issues are rarely our fault.

It’s all about regulations, as I explain below.


Prior to 2008, appraisal fraud was rampant, despite the fact that the vast majority of appraisers were 100% honest.

Loan officers were allowed to place orders directly with appraisers, and they often put undue pressure on the appraisers (by threatening to pull future business) to come in at a certain value even if the market did not come close to justifying it.

As a result some appraisers ignored nearby comps, mismeasured properties, ignored external influences and even added amenities (like pools) that did not exist.

Because these fraud cases often made headlines, appraisers received too much blame after the meltdown, as even honest appraisers were sued by lenders and many lost their licenses.


In 2009, Andrew Cuomo pushed through the Home Valuation Code of Conduct (HVCC) while he was the Attorney General of New York.

Cuomo pushed the new rules ostensibly to avoid the issues we saw prior to 2008, and Fannie and Freddie endorsed them – forcing all lenders to comply.

The rules effectively forced lenders to order appraisals from a pool of appraisers – who were supposed to be part of a larger appraisal management company.

And, most importantly, HVCC prohibited loan officers from ever speaking directly with appraisers.


When the Dodd-Frank Act (regulating the mortgage industry) was passed in 2010, it strengthened HVCC rules and gave the Consumer Financial Protection Bureau (CFPB) tremendous enforcement power.

And this is what scares lenders and appraisers alike, as the CFPB can be very aggressive with its enforcement of the rules and its fines.

SO – ALL LENDERS have to be very careful when it comes to appraisals, as all lenders are heavily regulated and subject to audits.


  1. Regulations require us to order appraisals from an “appraisal pool” – so appraisers are chosen at random (and not assigned to specific deals).
  2. We are not allowed to ever speak directly with appraisers and we are definitely not ever allowed to discuss value.
  3. No matter how flawed we think a value conclusion is, regulations prevent us from just ordering a new appraisal; our only option is a formal “rebuttal” via our Appraisal Manager.
  4. Appraisers are often reluctant to change their value conclusions for ego reasons, for liability reasons (they don’t want to face backlash like they did after 2008), and for economic reasons (they don’t get paid any more for revising an appraisal).
  5. The above Code of Conduct rules did eliminate fraud, but they also allow some appraisers to do inferior work on occasion because the appraisers know they can’t be held accountable by agents or loan officers.
  6. We are just as frustrated as borrowers and agents are when appraisals come in low, because a) we want our clients to have the best possible experience; b) we don’t get paid a penny if deals don’t close, so deal-threatening appraisals hurt us too; and c) low appraisals require an enormous amount of time on our part for rebuttals and restructuring. Hence, we have every incentive in the world to ensure appraisals support the contract price.

The few things we are allowed to do to get higher quality appraisals include: (1) staff our own pool of appraisers with the best talent we can find; and (2) pay higher fees and high rush fees to attract stronger appraisers and better work. And we do both of course.

But – when appraisal issues arise, please blame the regulations and remember that we are every bit as frustrated as everyone else.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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