New York - Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets.

The requests are coming in record numbers, from owners of $10 million estates and one-bedroom bungalows, from residents of the high-tax enclaves surrounding New York City, and from taxpayers in the Rust Belt and states like Arizona, Florida and California, where whole towns have been devastated by the housing bust. Click here to read the full article from the New York Times.

The newly revised Home Valuation Code of Conduct goes into effect on May 1st, but it remains to be seen whether the new provisions will resolve troubles that became apparent last year. The revisions require lenders to obtain appraisals through a third party, so-called Appraisal Management Companies, rather than order the appraisals directly through their own sourcing. The goal here is to create a firewall between the lenders making loans for properties and the appraisers, who are valuing the properties, thus eliminating any kind of pressure to influence the outcome of the appraisal.

I completely agree that there needs to be a way to prevent lenders from putting pressure on appraisers to produce favorable property valuations and am in favor of a firewall between the lending industry and appraisals. But the provision to require a third party to order appraisals is problematic.

Appraisal Management Companies (AMC’s) add another layer of fees to the process, which will either be passed on to buyers or will force appraisers to operate as such reduced margins that it will become too difficult to attract and retain appraisal professionals of high quality and experience. Appraisals these days are more complicated than they were  a couple years ago, when the market was constantly rising. A thorough, professional appraisal is a complex process, and it would be an unfortunate development if the appraisal industry was forced to raise fees in order to stay in the business.

Further, there are bound to be loopholes in the new provisions that still allow lenders to work directly with appraisers, defeating the purpose of the revisions to the code.

I’m curious to know what lenders and mortgage brokers think about the changes in the code, and how this will pan out for all professionals involved in the industry. Please feel free to share in the comments section below.