In June, it took our Southern California clients an average of 40 days to close on their homes, 5 days longer than it did in May. The good news for our clients is that even though it may take a while to close, only three of our Southern California clients’ deals failed to get financing since February.
The main reason closing is taking longer is because on May 1st, the Federal Housing Finance Agency’s Home Valuation Code of Conduct (HVCC) took effect. The HVCC is designed to make home appraisals more reliable by restricting the interaction between mortgage lenders appraisers. Since May 1st, lenders can’t deal directly with appraisers. Instead, lenders schedule appraisals through third-party management companies. This adds a buffer between the lender and appraiser, but it also adds time to the process. You can get all the details in the official statement from the Federal Housing Finance Agency (25K PDF).
“The HVCC is supposed to improve the accuracy of appraisals, but we’re seeing just the opposite,” says Anna Nevares, one of our agents in Southern California. “Many of the appraisers aren’t familiar with the local market and they often appraise home well-below market value. Right now, we’re spending a lot of time disputing appraisals based on bad comparable homes.”
For more numbers, download the spreadsheet with the data on what happened in June at Redfin.