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One of the most important components of the home buying or selling process is getting the home appraised. In fact, many lenders will require an appraisal before a deal can be closed. With an appraisal, an unbiased third party will have the opportunity to take a close look at the home and determine a fair price.
While the appraised value of the home might not be the same as the final sales price, the appraisal still helps create a ballpark figure to be referenced throughout the negotiation process. Additionally, having an accurate appraisal will make it easier to forecast future tax payments and insurance premiums.
But the appraisal process has significantly changed over the past few years. Today, a growing portion of lenders are now willing to accept a desktop appraisal, which can now be conducted digitally. Desktop appraisals allow potential home buyers to complete the entire appraisal process through digital means, which can help save time, save money and offer various other benefits.
Desktop Appraisals, Explained
A desktop appraisal – sometimes referred to as a digital appraisal or desktop valuation – is a home valuation process that is conducted digitally. Though some lenders and appraisers were already beginning to experiment with desktop appraisals beforehand, the COVID-19 pandemic increased the number of lenders willing to accept the digital alternative.
The appraisal process – both digital and non-digital – will involve qualitative and quantitative aspects to determine the value of your home.
The quantitative aspects involve looking at numbers to generate a rough estimate. This includes considering the recent sales prices of similar homes, looking at tax records, basic gross living area calculations (GLA) and more.
With a desktop appraisal, the quantitative aspect will be the primary determiner of your property’s value. The qualitative aspect (physically examining the home), on the other hand, will have to be done through digital means, if it’s required at all.
Quantitative standards for desktop appraisals are set by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac and their use is dictated by the Federal Housing Finance Administration (FHFA).
The qualitative aspects include things such as looking at the physical condition of the home, trying to identify any major problems (which were likely covered during the inspection) and examining the interior floor plan. If you have made any recent changes to your home, it very well may have increased in value since the last appraisal.
Desktop Appraisals vs. Traditional Appraisals
The main difference between a desktop and traditional appraisal is that with a desktop appraisal, the appraiser will never physically visit your property. This means they won’t be able to – at least in person – do things such as taking photos or physical measurements and document key components of the home.
In some cases, a desktop appraiser might ask to see photos of the home and possibly even do a virtual tour. But because they are not physically entering the home, a desktop appraiser will usually rely on a lot more third-party data and analysis than a traditional appraiser. They will usually use multiple different sources – including a multiple listing service (MLS), an analysis of gross living area (GLA), special appraisal software and more – to make their final decision.
Understanding the Desktop Appraisal Process
If you are interested in having a potential property appraised by a desktop appraiser, the first thing you will need to do is check with your lender to make sure they allow it. Since COVID-19, a growing portion of lenders are now open to desktop appraisals, but some may prefer a traditional appraisal or may require you to work with a specific appraiser.
Once the lender has ordered the appraisal, the process can begin. In some cases, a desktop appraisal can take just a few minutes to complete – especially if the appraiser does not require any photos or additional documentation.
But in other situations, such as situations where tax records are not up to date or there are not many comparable home sales in the area, the analysis might take a little bit longer. Providing the appraiser with any needed documentation can help accelerate the desktop appraisal process.
Once completed, the appraiser will then submit the final report to the lender who will then determine whether the proposed price for the home is fair. Once approved, you will then be able to continue with the home buying process.
The entire desktop appraisal process can often be completed in less than an hour – instead of over a day or two. This is especially useful in a competitive housing market when there are multiple offers on a single home and deals are often being made quickly.
By eliminating the need for an appraiser to visit the property, both the appraiser and anyone living in the home can avoid needlessly spreading COVID-19.
Due to the efficient, streamlined process, a desktop appraisal typically costs considerably less than a traditional appraisal. This is a great way to cut down on closing costs.
Because a desktop appraisal is more reliant on the use of hard data – rather than qualitative factors that are harder to measure – some biases can be eliminated or reduced. This means buyers are more likely to get a fair price point.
Traditional appraisers can only make so many estimates in a day. Even if the appraisal itself doesn’t take long, finding an available time that works for everyone can be a challenge. With a desktop appraisal, appraisers can avoid capacity constraints.
A good appraiser will eliminate as much guesswork as they can. By using a consistent process for every property they appraise, buyers will end up leaving a lot less to chance.
With limited access to seeing the property, it can be easy for a desktop appraiser to overlook undocumented damages. Not every damage can be easily captured in a photo.
Updating your home may cause it to increase in value. But if an appraiser is not made aware of these updates, this might be overlooked. While this can also happen with a traditional appraisal, the data-heavy nature of desktop appraisals could mean updates are more likely to be overlooked.
Desktop appraisal options are reliant on data collection using methods that can be found online. But when there are limited records or records are paper-only (more likely in low-density areas), the appraiser might not be able to get the information they need to make an accurate estimate.
When a Desktop Appraisal Makes Sense
There are quite a few situations where getting a desktop appraisal will make sense. Desktop appraisals are ideal for newer properties or, at the very least, properties that appear to be in decent shape. They are also best for “traditional” single-family properties. This is if you are buying anything unusual – such as a store recently converted to a home – you might need to get an in-person appraisal.
You will want to make sure your lender will accept a desktop appraisal. If this is an option they are open to, they might even select the appraiser for you. The lender will also likely require the property is your primary residence and a loan-to-value ratio no higher than 90%. But if you can check all the boxes, a desktop appraisal might be a great idea.
Keep in mind, desktop appraisals can only be used for single-family homes. If you are buying a multi-family home, you will need a traditional appraisal.
All Praise to New Age Appraisals 🙌
In a competitive real estate market, finding ways to be more efficient can make a major difference. Using a desktop appraisal is just one way you could potentially make the closing process easier and more timely. If you are in the process of buying a home, be sure to check if this is a viable option.
The Appraisal Foundation. “Uniform Standards of Professional Appraisal Practice.” Retrieved July 2022 from https://www.appraisalfoundation.org/imis/TAF/Standards/Appraisal_Standards/Uniform_Standards_of_Professional_Appraisal_Practice/TAF/USPAP.aspx?hkey=a6420a67-dbfa-41b3-9878-fac35923d2af