As if things weren’t already challenging for Minneapolis duplex investors, along comes the news that on May 1 the national rules for real estate appraisals will change.
Lenders will have to guarantee that every loan they sell to Fannie Mae or Freddie Mac complies completely with something called the HVCC or home valuation code of conduct.
As the bulk of loans for non owner-occupant investors are sold to Fannie or Freddie, they are the ones likely to be most adversely effected.
The new code will prohibit mortage brokers from ordering appraisals. Instead, third party appraisal management firms will pick appraisers from their own networks.
The code also requires a buyer to pay for an appraisal up front rather than rolling the cost into closing costs.
So what if a property appraises too low and another appraisal is necessary in order to close? Does the buyer have to pay again? Yes.
What if the buyer is intending to live in the duplex? Do these new rules apply?
No. FHA has its own rules for appraisals, which to date, don’t include the HVCC.