A significant change has been made to the home appraisal process, which will affect both first homebuyers and upgraders.
Lenders will now be required to implement a borrower-driven process for requesting a Reconsideration of Value (ROV).
Essentially, owners of homes can now contact their lender and ask for their home to be revalued so that they can alter their mortgage situation to reflect the true value of their property. It will also address owner concerns about inaccuracies and the failure to recognise the value of any home improvements, such as extensions or the installation of a swimming pool.
This new mandate has come from the US Department of Housing and Urban Development (HUD), in partnership with Fannie Mae and Freddie Mac.
The current appraisal system has faced criticism for potentially undervaluing properties, sometimes due to errors, omissions, or even discriminatory practices. This can create significant obstacles for borrowers, particularly in under-served communities. Currently, there’s no standardized process for homeowners to challenge an appraisal, leading to inconsistencies and potential inequities.
The updated ROV requirements will empower borrowers by giving them a formal channel to request a review of their home’s appraised value. Lenders will be obligated to establish a clear and accessible process for borrowers to submit these requests, along with any supporting documentation. This shift promotes greater transparency and fairness in property valuations.
Impact on the housing market
These changes have the potential to reshape the housing market in several ways:
- Increased Accuracy: By allowing borrowers to flag potential errors or provide additional information, ROVs can lead to more accurate property valuations.
- Reduced Bias: A standardized ROV process can help mitigate potential biases in appraisals, promoting a more equitable housing market.
- Streamlined Process: While potentially adding a step, a formal ROV process can ultimately reduce disputes and expedite the home-buying process by addressing concerns early.
- Greater Transparency: A clear and accessible ROV process fosters greater transparency and trust between borrowers, lenders, and appraisers.
The implementation of these new ROV requirements represents a significant step towards modernizing the appraisal process. By giving borrowers a voice and promoting greater transparency, the industry aims to create a more efficient and equitable housing market. Lenders must now adapt their processes to ensure compliance and a smooth transition to the new arrangement.