Drive-by appraisal vs Interior appraisal, which is best?

Drive-by appraisal vs Interior appraisal, which is best?

Everybody likes to save money, right? If you are getting a loan to borrow against the equity in your home, and you want the most cash possible, then a drive by appraisal may not be the answer. Getting a drive-by appraisal may be less expensive than a full interior appraisal, however there are some shortcomings as well, so let’s take a look at the differences.

So what’s the differences between a drive-by appraisal and interior appraisal?

Drive-by appraisal

how accurate can a drive by appraisal beA drive-by appraisal’s main difference from a interior appraisal is that the house is inspected from the road rather than going on the the inside. As you might expect this type of inspection, or observation of the subject property, has its shortcomings. You are not able to measure the house to get the most accurate gross living area and you will not have first hand knowledge of the quality of construction and condition of the improvements.

Since no interior inspection is being performed, information about the size of the home and the quality and condition of the improvements must be obtained from another source. This can be from several different sources including, but not limited to: conversations with the homeowner, county records, a previous appraisal, local multiple listing service, or some other local data service in your market area such as the Appraiser Group Data Association (A.G.D.A), which is available in the Birmingham, AL metro area  where I work.

The most reliable and accurate data available will be from a previous appraisal if you appraised the home before or from another source of information that has a high degree of accuracy such as A.G.D.A., since that information was collected by appraisers who have good observation skills and know how to obtain accurate square foot measurements. The other sources of information will vary in reliability based on the source and type of improvements you  have. County records and area multiple listing services can provide good information with varying degrees or reliability.

Because the drive-by appraisal relies on second hand information most of the time it can be less accurate, however the appraiser doing this type of appraisal must get information from some source to base their opinion of value on. This is however where inaccuracies can occur. If county records do not have accurate square footage, or if previous multiple listing information does not include work that has recently been done to the house, then the appraisal will not be as accurate because it does not accurately reflect what the house is like. If the home is under valued then this may affect your loan amount.

Interior appraisal

interior appraisal provides better information than drive byUnlike a drive-by appraisal, the interior appraisal relies on first hand observation of the property. The appraiser measures the home themselves rather than relying on someone else’s information. Variations in square footage, or gross living area, can be substantial if two people are not using the same measurement standards. The ANSI standard is not a requirement for appraisers, however it is one that  most voluntarily use. It provides consistent guidelines for measuring and calculating the square footage of attached and detached single family houses. To get the most accurate value possible we must start with an accurate estimate of the amount of living area a home has because if we don’t have that then the appraisal is flawed from the start.

In addition to square footage, an appraisal must be based on accurate information about the quality and condition of the house’s construction. Features such as hardwood floors, crown molding, and other high end finishes will effect the appraisers opinion of value. An interior observation of the house makes this possible rather than relying on old multiple listing information or questionable county records.

One last benefit of an interior inspection is being able to ask the owner about recent improvements to the house. This is possible with the drive-by appraisal if the appraiser actually talks to the owner however that does not always happen.

Beyond the appraisal inspection

The appraisal inspection is typically the biggest difference between a drive-by appraisal and an interior appraisal. After the inspection is completed the procedure for completing the assignment for either type is the same. The appraiser takes the information about the property and uses it to choose the best sales comparables that have occurred recently. Of course, as you might expect, if the information about the house is incorrect then this can effect the sales that you choose, so as you can see getting the most accurate information about the house being appraised is very important.

Question

Did I leave anything out that you may have a question about? Have you ever had a drive-by appraisal where the information about the house was not accurate? Leave me a comment below about what happened. Did you request an interior appraisal be performed to get more accurate information? I look forward to hearing your story.

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Comments

  1. Brian Brewer says:

    Our Drive-by reports give a value range only as well state that by accepting the report the user understands the additional risk due to no up close and interior inspection. Many people are totally unaware of such an appraisal.

    • Hey Brian, it’s interesting to hear from other appraisers. I think a value range is more realistic too since the real estate market is not perfect. I agree that the drive-by does present it’s own shortcomings and readers of the report should be aware of them. Thanks for sharing your thoughts.

  2. I rarely take drive by assignments. I am more apt to take them if I had completed an interior inspection of the property within the last few years. Even then, I include an extraordinary assumption that the home is in the same condition and unchanged since the date when I did the full inspection.

    In instances where I never completed an interior inspection I will do a drive by if the property had sold within the past few years and there is an MLS listing with interior photos and descriptions of the property. Again, extraordinary assumptions on condition, finishes, upgrading, etc.. When relying on MLS data I also include a statement that MLS is a marketing vehicle that typically overstates the positive aspects of a property and understates the negatives. I then state that a full interior and exterior inspection will result in a more reliable estimate of market value.

    • Those are some good tips Tom. I like the part about the MLS being a marketing vehicle and possibly overstating the positive aspects. Thanks for sharing.

  3. David Niksich says:

    I’m not quite sure what the prevailing thought is regarding the ‘time factor’ for us appraiser’s on these drive-by’s but they seem to take equally as long as a full 1004 normally would. Add in the extra stress of not truly knowing the subject property inside & out and the client’s cost savings passed along to our bottom lines and boy oh boy, I’m just not a big fan of this particular product. Do you know that I actually had a client (an AMC) tell me to remove some of the exterior pics I had in my 2055 report because they appeared to have been taken from ‘on the premises’ and that could constitute as trespassing??? Luckily I had been granted permission from the owner(s) so I refused their request but isn’t it always something? The amount of responsibility we are being asked to shoulder continues to climb so be careful out there my friends. CYB has never been as critical as it is right now – let them look for scapegoats elsewhere by giving them a superior appraisal product. Great post once again Tom – keep ’em coming!

    • Hey David, I’m with you. The only time savings is the actual property inspection, which could vary depending on the size of the house. This time savings could be lost again when you have to do research to find the most accurate information on the house to include in the report. Appraisers are still being held to the same standard for our opinion of value whether we do a drive-by or an interior inspection. Good for you standing up for yourself when they asked you to remove the pictures. We as appraisers must stand up for ourselves and not crumble to the silly demands of AMC’s. Thanks for reading!

  4. One thing that I like to point out about drive-by appraisals is that if it is later identified that the home has different features, square footage, or condition than the appraiser assumed, it does not mean that the appraisal is incorrect or inaccurate, it just means that the appraisal was based false assumptions and may not be as useful to the client.

  5. You’re right that interior inspections are going to tell the story of value much better than a drive-by. More details = a better chance of a solid appraised value.

    • Thanks Ryan. I think it goes back to the old saying: garbage in, garbage out. We must make sure the property info. is correct or the value opinion will be flawed.

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