So much of what we do now happens remotely — why should home buying be any different? If you’ve been waiting for your home appraisal, you may be in luck. A new method for home appraisals uses technology to make this part of the process faster, cheaper, and more efficient.
A desktop appraisal is an assessment of a property’s value by a professionally trained and licensed or certified appraiser that takes place remotely. Instead of conducting an in-person inspection of the property, appraisers use a variety of digital data sources to complete their valuation, such as photos, floor plans, tax records, and information obtained through the Multiple Listing Service (MLS).
Until recently, lenders only used desktop appraisals for home equity loans, loan servicing, and portfolio evaluations. For higher-risk transactions, like new home purchases, lenders required an in-person appraisal — also called a traditional or full appraisal.
The desktop appraisal vs. full appraisal division is a misnomer, though. Nothing is lacking in a desktop appraisal; it’s just a difference in methods. In March 2022, major lenders even incorporated desktop appraisals as an acceptable method for home sales.
Desktop appraisals establish a property’s fair market value like a traditional one, but these approaches have some key differences.
In a traditional home appraisal, appraisers conduct an in-person inspection of the property and digitally review similar properties (also known as comparables, or “comps”) to see how a home stacks up against the neighborhood standard. Appraisers then use their expertise to analyze these data points and make a point-in-time opinion of value.
Desktop appraisals offer the same point-in-time opinion of value as the traditional alternative. They even use the same process of pulling comparables, but instead of an on-site inspection, appraisers analyze documentation (like photos and floor plans) to assess the property’s condition.
When this method was initially adopted as a temporary solution to keep appraisers and homeowners safe during the COVID-19 pandemic, appraisers were not required to vet data provided by parties with a financial interest in the property (like the property owner). Since the designation of desktop appraisals as a permanent option, lenders now require that an outside source must verify any data provided by those with a financial interest in the property.
This method isn’t just a bespoke solution. Desktop appraisals can be used for a variety of purposes:
Desktop appraisals are having a moment in the limelight — as they become more popular and the technologies used to conduct them continue to improve, lenders are likely to use them for even more real estate needs in the near future.
For homeowners, bank lenders, and appraisers alike, there are several benefits of using the desktop approach.
Desktop appraisals can dramatically reduce the turnaround time for appraisal reports. Traditional appraisals can take two days to a week to complete, between scheduling an inspection, completing the walkthrough, reviewing comparable homes, and compiling the report. By eliminating the scheduling and on-site requirements, appraisers can complete desktop appraisals in as little as a day or mere minutes.
This is a huge advantage for homeowners anxiously awaiting the valuation of one of their largest investments, bank lenders eager to close, and for appraisers who can complete more appraisals (thus turning a greater profit) in a day.
A traditional appraisal averages between $315 and $405, while a desktop appraisal only costs $75 to $200 — but both methods can cost more for large or complex properties. By eliminating the on-site visit and leveraging digital technology to help analyze data, desktop appraisals can be more cost efficient than the traditional alternative. This is a particular advantage for the homebuyers, who typically carry the home appraisal cost.
Some homeowners worry: Do desktop appraisals come in low? There is growing evidence that desktop appraisals are just as accurate, or even more accurate, than the traditional version.
The real estate industry has begun to contend with its long history of discrimination in recent years. Appraisal bias — or the undervaluation of homes of people of color due to ethnic or racial bias — is one example of the many obstacles homeowners of color can face when buying or selling their homes. In their “Action Plan to Advance Property Appraisal and Valuation Equity,” the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) found:
...12.5 percent of appraisals for home purchases in majority-Black neighborhoods and 15.4 percent in majority-Latino neighborhoods result in a value below the contract price (the amount a buyer is willing to pay for the property), compared to only 7.4 percent of appraisals in predominantly white neighborhoods.
The price of such discrimination is staggering. A report by the Brookings Institute found that appraisal bias costs Black homeowners on average $48,000 per home, or $156 billion in cumulative losses.
Desktop appraisals offer a potential solution by removing the human element of an on-site home inspection. Instead, appraisers only assess hard data points — like floor plans and gross living area (GLA) calculations — making it harder for conscious or unconscious bias to seep in.
If you’re looking to cut down on costs and turnaround time, a desktop appraisal is an easy choice — but there are limits to these advantages. Unfortunately, not every property or transaction is eligible for a desktop appraisal. For example, two- to four-unit properties, co-ops and condos, refinances, and manually underwritten loans are ineligible and instead need to use a traditional appraisal.
Additionally, if your home is unique in your neighborhood — for example, you’re the only house in your ZIP code with two stories and a pool — a desktop appraisal is unlikely to valuate these factors accurately, given the lack of comparables. A traditional appraisal is a better choice for these homes, as an appraiser can better evaluate these factors with an in-person inspection.
Lastly, if the valuation of your property could be contested (like in a divorce), it’s best to go with a full home appraisal. A home is often a couple’s greatest asset and, for that reason, can be subject to debate in divorce proceedings. The additional scrutiny of an in-person inspection can provide clarity and confidence if the other party challenges the appraisal.
Desktop appraisals are ideal for houses in established neighborhoods with comparable properties that have multiple previous sales due to the plethora of data available for appraisers to pull when evaluating your home. If you live in a neighborhood like this and are looking to cut down on cost, waiting time, and general hassle, a desktop appraisal may be the perfect solution for you.
Keep in mind that this option is only available for some properties and transactions. If you are looking to refinance your home, are buying a multi-unit property, or have a distinctive home without quality comparables in your neighborhood, you will have to use a traditional appraisal.
Not sure what to choose? Speak with a real estate agent, mortgage lender, or attorney for expert advice. Even if it’s not the right method for your current appraisal need, it may be for your next one. One thing’s for sure: Desktop appraisals are here to stay.
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