Desktop Appraisals: Pros and Cons

Are Desktop Appraisals the Answer?

The big news in the real estate, mortgage lending, and appraisal industry is desktop appraisals. In a recent announcement, FHFA Acting Director Sandra Thompson revealed that both Fannie Mae and Freddie Mac will continue to allow appraisals to be conducted remotely.

Are Desktop Appraisals the Answer

This was very happy news for all of the attendees at the Mortgage Bankers Association Annual Convention and Expo where Ms. Thompson was speaking.

Remote appraisals were originally introduced after the onset of the Covid pandemic in 2020 to allow the lending process to continue during the lockdowns and social distancing guidelines that were put into place. It was a temporary fix that is now becoming permanent.

As an appraiser and one who analyzes data, I am hesitant to fully embrace the idea of collecting data remotely. While on paper it looks like in might work you must also consider that in some instances the data appraisers are expected to use will be provided by untrained homeowners who have a vested interest in their home appraising for as high as possible.

In this post, I will explain what a desktop appraisal is and I’ll share my thoughts on the pros and cons of using them.

What is a Desktop Appraisal?

A desktop appraisal is an appraisal that is performed remotely without the appraiser actually visiting the property. The data the appraiser normally collects her or himself is provided by a third party, typically the homeowner or from MLS or tax records.

With the help of technology, homeowners are able to provide some information to the appraiser. Several companies have developed apps that make it possible for the homeowner to give a virtual tour of their home to the appraiser using their smartphone.

In addition, another app claims that it can aid the homeowner in measuring their home in order to provide the appraiser with the square footage they need to complete the report. Given the fact that the square footage of a home is one of the most important influences of value, leaving the measuring to a novice may not be wise.

After the data is collected from the various sources the appraiser then completes their report similar to what they would do after they collected the data themselves. The appraisal process used to provide an opinion of value is the same no matter where the data comes from, however, the reliability of the value opinion is dependent on the accuracy of the data used.

As a real estate appraiser for over 30 years, I realize that there is a time and place where desktop appraisals can be beneficial. Part of the announcement was that the desktop appraisal could be used for new home purchases, however, given my experience I believe that this may not be wise in all cases.

Pros and Cons of Desktop Appraisals

I have listed below some of the pros and cons of a desktop appraisal for you to make a decision on your own. Please leave a comment below to let me know your thoughts.

Pros

Quicker Turn Times – Because the appraiser is not required to visit the property, desktop appraisals can take less time. Keep in mind that the appraisal process is the same after the data is collected so the time savings occur from not having to drive to the property, measure the home, and walk through the interior collecting information.

Less Expensive – With the way gas prices have skyrocketed lately the cost to drive to the property and then visit all of the sale comparables can cut into the appraiser’s bottom line. These steps are not performed with a desktop appraisal so the fee is usually less than a full appraisal.

More Convenient – With a full inspection the appraiser must schedule a time with the agent or homeowner to visit the property. Since all of the work is done from the appraiser’s office it is much more convenient for the agent or owner because they will not have to take off from work or alter their schedule.

Cons

Less Accurate – Because there is no on-site property inspection by the appraiser a desktop appraisal has the potential to be less accurate. The source and reliability of the data the appraiser uses play a big part in the overall accuracy.

Whenever tax records are used for square footage the accuracy of the report can be compromised. Tax records rarely have accurate square footage and this information is sometimes used by real estate agents in their MLS listings so using MLS data for desktop appraisals is not always reliable either.

There are some new approaches using technology to assist in data collection but they have their own pros and cons as well. The first is virtual walkthroughs using Facetime, Zoom, or other online video communications apps.

The homeowner uses their phone to “walk” the appraiser through their home so the appraiser can view the interior. The appraiser can request the owner to take pictures of various rooms and features of the home.

This can be helpful if the owner is able to do a good job of showing the appraiser everything. If something that is not shown has a big impact on the value of the property this could result in the appraised value being less accurate.

In addition to virtual walkthroughs, there are new apps that assist the owner in measuring the home’s square footage. In my opinion, this can be trickier than the walkthrough.

While the makers of these apps tout their accuracy as matching that of measurements done by appraisers I question the ability of the owner to use the app correctly and to be able to measure every square foot of the house.

Measuring a 1,500 SF square shaped home is far different from measuring a 4,000 SF 1.5 story home with a partially finished basement. Most homes are not perfectly linear so it is necessary to consider all of the nooks, crannies, and corners within the home, especially on a half second-story and finished basement.

If the owner is not properly trained in using the app correctly their measurements could adversely affect the accuracy of the appraisal.

More Liability – As it stands right now the appraiser is responsible for the accuracy of data used in the desktop appraisal. If this data is incorrect and the appraisal is inaccurate the appraiser is more liable and could be sued.

Whenever an appraiser has help in performing an appraisal they must disclose the names of anyone that provided significant professional assistance. Will the appraiser need to include the name of the homeowner or real estate agent? Will that person be legally responsible for the work they did and the data they provided?

Less Detailed – Appraisers are trained observers. With education and experience, we can spot items that could have a potential impact on value.

When no interior inspection is performed this can decrease how accurate the data is. Even if the appraiser takes a virtual tour of the house there are still things that the appraiser may not see as clearly as if they were onsite.

Perfect Scenario

The perfect scenario for performing a desktop appraisal would exist when the accuracy and reliability of the data are the highest. If a prior appraisal is available that has the correct square footage and a detailed description of the improvements then this information can be used in a desktop appraisal.

Of course, if this is not the case then actions should be taken to obtain the correct information. If reliable data cannot be obtained then an interior inspection should be performed.

As with everything else, there are pros and cons that must be weighed to determine which course of action is best to take. A desktop appraisal should never be done just to get a faster report.

You must keep in mind that the appraiser is the eyes and ears of the lender, however, the very nature of the desktop appraisal takes part of this away and therefore reduces the reliability of the appraisal report. Lenders should use extreme care in determining which appraisals qualify for a desktop appraisal.

Conclusion

So now you have the pros and cons of a desktop appraisal to help you decide if this is the right product for the property you need to be appraised. If you can think of anything else that should be considered please leave a comment below and as always thanks for reading.

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Comments

  1. This is big news. I think there is certainly a place for desktop appraisals and even appraisal waivers. But for a purchase this could get really interesting. In so many cases seeing a property makes all the difference. On a different note, we should always critique a system when it changes, especially when it comes to lending. Let’s never be comfortable when the powers that be change the rules of the system.

    • I agree, Ryan. There is a time and place for these types of appraisals but I am not sure if a purchase should utilize these. I believe that desktop appraisals will be used to speed the process whether they are the best product or not. This could end up biting someone in the long run.

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