New Appraisal Disclosures Right Around the Corner

We are officially less than twenty days away from the new appraisal disclosure that will go into effect on July 18.  The good news is that both vendors, Datacomp and NADA, have undergone significant system improvements over the last 16 months to produce valuation options for lenders.

As we get closer to mid-July the frequency of questions is increasing, primarily from TMHA retailers.  The most common concern from retailers is if the values produced by either vendor will come close to the market sales price.  Certainly a valid concern, especially if the value delivered by the lender from the third-party vendor to the consumer three days prior to close is less, or significantly less, than the already agreed upon sales price.  The concern of the “chilling effect” such news could have on some consumers has retailers worried about losing sales.

It is critical that retailers understand that the regulations are such that the values must be determined independent of the retailer or the lender (anyone with a financial incentive in the transaction).  The values that will be determined are the vendors’ values on a home as it sits on the retailer’s lot.  This means the value will be exclusive of additional costs like site preparation, delivery, setup, skirting, decks, steps, air conditioning, etc.  As we all know these additional costs are significant and impact the final sales price.  It is important that retailers are aware of this and counsel their customers prior to the third-party valuation disclosure.  For most retailers this will be a change in their current sales process. 

Initial recommendations are that retailers separate out the additional “off the lot” costs with customers.  Explain these costs and explain the regulation that will require they receive a valuation report three days prior to closing.  In order to manage buyer expectations properly they will need to expect that the value they receive prior to close is just for the home as it sits on the dealer’s lot.  Knowing this and knowing that there are additional cost factors that will go into the home’s final agreed upon selling price will decrease the likelihood that consumers back out from sales because they became confused that the home they are buying is valued “less” than the agreed upon sales price.

For retailers wishing to know more about NADA and Datacomp’s systems and services, both companies are hosting webinars prior to the new rule’s implementation deadline. Datacomps webinar is available now. As soon as we receive the details on NADA’s webinar we will send them out and update this post.

Webinars:

• Datacomp
• NADA (Not yet available)

Finally, at TMHA’s annual convention, which falls one month after the new rule goes into effect, Dick Ernst with Financial Marketing Associates, Inc. will host an open forum discussion with the audience to review what we know after the first month of implementation.  The forum will discuss best practices and seek recommendations for potential improvements to the vendors.