SILVAR  :  Newsroom  : Real Estate Articles

Real Estate Articles

REALTOR®: Pending Home Sales Up for Fourth Consecutive Month, but New HVCC Causing Delays

Wednesday, July 1, 2009

Pending home sales recorded its fourth straight monthly gain as very favorable housing affordability and a first-time buyer tax credit boosted activity, the National Association of REALTORS® reported this week.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85. The last time there were four consecutive monthly gains was in October 2004.

The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago. In the Midwest the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008. The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago. In the West the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

NAR chief economist Lawrence Yun cautioned there could be delays in the number of contracts that go to closing due to the new Home Valuation Code of Conduct (HVCC). "Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," he said.

The Home Valuation Code of Conduct became effective May 1, 2009 for any mortgage sold to Fannie Mae and Freddie Mac, and establishes standards on solicitation, selection, compensation, conflicts of interest and appraiser independence. Under the guidelines, real estate agents and mortgage brokers may not serve as a third party between a lender and appraiser, in the selection, retention, and compensation of an appraiser. Lenders are permitted to use "in house" staff appraisers to conduct appraisals. However, the loan production staff is prohibited from selecting, retaining, recommending, or influencing the selection of an appraiser for an assignment or for inclusion on an appraisal roster. They are also prohibited from having any substantive conversation with an appraiser or appraisal management company regarding valuation, including ordering or managing an appraisal assignment.

John Tripp, a board director of the Silicon Valley Association of REALTORS®, said the appraisal problem is serious and could delay a housing market recovery is appraisal problems are not quickly corrected. Tripp, who is with Foundation Trust, said while REALTORS® believe that a strong and independent appraisal industry is vital to restoring faith in the mortgage origination process, appraisal fees have doubled with the creation of an appraisal management company. He said appraisers are unfamiliar with the areas where they are now appraising homes, and this has led to significant discrepancies in the value and serious delay in closing of transactions.

"These issues, along with significant delays in receiving appraisals, have placed transactions in jeopardy," Tripp said.

Responding to concerns about the HVCC guidelines, U.S. Representatives Travis Childers (Miss.) and Gary Miller (Ca.) have introduced H.R. 3044, which would place an 18-month moratorium on the HVCC, so problems arising from the new guidelines that are negatively impacting transactions can be studied and corrected. REALTOR® officials say speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.

NAR President Charles McMillan said the appraisal issue is complicated and sellers should not hesitate to speak with an appraiser about their home. "We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don't distinguish between traditional homes and distressed property," he said. "Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood," he said. "If recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out."

Tripp said it is always good to seek the advice of a professional REALTOR® who is experienced and knowledgeable about properties in your area. "A REALTOR® could offer guidance and information to help you with this process," Tripp said.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

» Back to Real Estate Articles

Site Navigation