Alternative Appraisals & Why You Should Avoid Them

By Author: Master Appraisal
Total Articles: 3
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You may have seen or heard about them by now. Alternative appraisals are being asked for to provide a quick estimate of property value without paying the cost of a real appraisal.

Desktop Appraisals
Desktop appraisals are a property valuation done at the appraiser’s desk, by using information on the MLS and county records, instead of an in-person survey of the property.

Desktop appraisals are being requested to provide a quick estimate of property value without paying the cost of a real appraisal.

The valuation is performed based on county records, the MLS and sometimes an inspection by a 3rd party (realtor or a service provider) that may or may not have the knowledge to properly inspect a home and will not measure the home to determine if the records in the MLS or county are correct. This is being done to reduce time and cost but is done for the benefit of the bank not the home owner.

The liability still rests with the appraiser - and while there are appraisers out there completing these products, it is my opinion that they are not only a disservice to the home owner, but it is possible (and ...
... likely) to be inaccurate without a physical inspection of the property.

On the other hand, a full appraisal means that an appraiser visits your home, takes photos, measures the property, and evaluates the condition of your home.

Drive-By Appraisals
A Drive-By Appraisal is when an appraiser only looks at the outside of your home to estimate the home value based on the property’s exterior condition, the state of the surrounding area, recent comparable sales, and information on the MLS. A popular choice for refinance appraisals, this method has become more popular with recent pandemic-related concerns.

Curbside Appraisals
When state requirements or personal preferences make it impossible to physically inspect the inside of the home, Curbside Appraisals may be an option, depending on the lender. In a Curbside Appraisal, the appraiser comes to the home and inspects and measures the exterior. Then the appraiser will guide a homeowner through a video conference call to inspect the interior virtually.

Bifurcated Appraisals /Hybrid Appraisals
A Bifurcated Appraisal, also known as a Hybrid Appraisal, is when one party inspects the property, and a separate party completes the appraisal from their desk.

Banks and lenders tell us that the home appraisal is what slows down the loan approval process - and that having 2 separate parties working on the appraisal speeds up the process. What they won’t say is that hiring anyone to do the inspection (there are no regulations on who can inspect the property in a bifurcated appraisal - it could be a grocery delivery driver) means they can pay less for the inspection, and only pay a licensed appraiser to complete the report - thus lowering their own cost.

Learn more about Bifurcated Appraisals

Appraisal Waiver
The waiver program, begun by Fannie Mae in 2017, allows you to be approved for a mortgage without an appraisal at all.

Basically, the task of deciding how much your home is worth falls into the hands of your lender. They determine the value systematically on a computer, employing an online database from Fannie Mae rather than hiring a local appraiser to personally inspect the home you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely solely on computer processes to sort through an array of previously collected data.

Learn more about Appraisal Waivers

Gaining Popularity
Desktop Appraisals have been used in the past for situations like home equity lending, or portfolio evaluation, but not typically in the home buying process. COVID-19 has pushed the real estate industry to innovate, and banks benefit from the lower cost and faster turnaround of a desktop appraisal - making them more common in the home buying process.

Why You Should Avoid Alternative Appraisals
When buying or refinancing a home, you want to know without a doubt that you're receiving a fair deal and will not be “underwater” with your home loan. Computers and algorithms are in nearly every area of modern life, but when it comes to measuring the value of your property, nothing is more accurate than the careful assessment of a certified professional that you can trust.

For example, a poorly maintained property may be overvalued, leaving the homebuyer potentially paying more than the property is worth. Similarly, recently renovated properties may not be appraised correctly because without a physical inspection, the appraiser will have no knowledge of recent updates.

Keep in mind that a proper assessment of your home is far more important in the long run than some money that you may save immediately.