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Just when you thought you had this home buying thing down, you hear about a hybrid appraisal. You know what a hybrid electric car is, but a hybrid appraisal?
In real estate, a hybrid appraisal is an alternative to a traditional appraisal. With a traditional appraisal, a licensed appraiser inspects a property and analyzes local housing market data to make a property valuation.
With a hybrid appraisal, the inspection and analysis are split into two parts. A third party performs the inspection and the appraiser focuses on the data analysis.
Keep in mind that an appraisal inspection is different from the inspection performed by a property inspector, which is when a property inspector visits a home to look for and document defects.
While an appraiser can take obvious problems like a hole in the wall or standing water in the basement into account, an appraisal inspection aims to determine a home’s value rather than uncover what needs to be repaired.
If a hybrid appraisal sounds like a rare breed of appraisal, it’s not. In fact, hybrid appraisals are growing in popularity because they tend to streamline (read: speed up) the appraisal process and let appraisers concentrate on what they’re best at: determining the value of a home.
Sounds intriguing? Let’s take a look at how hybrid appraisals work, how they differ from desktop appraisals and why and when a hybrid appraisal might be best.
How the Hybrid Appraisal Process Works: 6 Steps
A traditional appraisal (or real property appraisal) is a professional licensed appraiser’s opinion of the value of a piece of property like a house.
Like a traditional appraisal, a hybrid appraisal aims to determine a home’s fair market value. Why? The lender wants you to be sure the property is worth what you’ve offered to buy it for.
Let’s take a look at the six main steps of a hybrid appraisal.
- The seller accepts the buyer’s offer
Either a hybrid appraisal or traditional appraisal will be performed when a buyer’s offer has been accepted and signed by the seller.
- The lender hires an appraiser or appraisal firm
The lender hires a professional appraiser or appraisal management firm to facilitate the appraisal process.
Hybrid appraisals are held to the same industry standards as traditional appraisals. The appraisal is expected to be unbiased, and the appraiser must have no direct or indirect interest in the home.
Similar to traditional appraisals, hybrid appraisals are also typically completed using a USPAP-compliant process and form.
- The appraiser hires a third party to look at the home
This is where the hybrid appraisal differs from a traditional appraisal. With a traditional appraisal, the appraiser handles the two-part process of inspecting the home and analyzing collected data.
With a hybrid appraisal (or bifurcated appraisal), the two tasks are separated (hence “bifurcated”). The inspection is outsourced to a real estate agent, property inspector or another appraiser. The third party is sometimes referred to as a field inspector.
- The third party inspects the home
The field inspector performs the inspection in person. They take pictures and possibly record videos. The field inspector might even use real-time remote viewing options so the appraiser can virtually walk through the home with the field inspector.
The appraisal inspection involves several tasks, including:
- Taking measurements
- Counting rooms and noting features
- Assessing the condition of the home
- Recording the home’s style
- Taking account of features that could affect the home’s valuation (if it’s next to a park, on a busy street, etc.)
- The appraiser looks at data
As the field inspector performs the walkthrough of the property, the appraiser gets busy checking out the available data on the property. This includes:
- Getting information about comps (comparable sales), which are area homes that are for sale or have recently sold (This information is generally accessible from the multiple listing service [MLS].)
- Collecting information in the public records about the home, including the age of the home, the amount of square footage and the number of bedrooms and bathrooms
- Reviewing any property inspection reports or engineering reports
- Building plans or blueprints
- Reviewing existing photos of the property and maps of the neighborhood
- Reading previous appraisers’ reports.
- The field inspector compiles a report and gives it to the appraiser
Field inspectors typically compile their findings using Fannie Mae’s Uniform Residential Appraisal Report (URAR). Appraisers use the URAR along with the data they’ve collected to create a hybrid appraisal report.
Hybrid Appraisal Report: What’s in It?
The hybrid appraisal report combines information from the field inspector’s report and the data the appraiser collected. The final hybrid appraisal report includes the fair market value of the home along with the date the value was determined.
The report will also contain information to support the appraiser’s estimate, such as:
- The home’s condition
- A description of the exterior
- Square footage and layout
- Local housing market trends
The report will also include:
- The scope of work, including what the appraiser and field inspector did to obtain their information.
- The intended use of the report and its intended recipients.
- Any special instructions from the lender or entities such as Fannie Mae or the Federal Housing Administration (FHA).
Hybrid Appraisal vs. Desktop Appraisal vs. Drive-By Appraisal
There are other types of appraisals besides the traditional and hybrid varieties. Two prevalent ones are the desktop appraisal and the drive-by appraisal.
A desktop appraisal is an appraisal completed entirely with property and real estate records and data. There is no on-site field inspection. Since the COVID-19 pandemic, desktop appraisals have been used as a no-contact appraisal alternative.
Unlike a hybrid or traditional appraisal, no interior inspection is completed with a drive-by appraisal. The appraiser only looks at the property from the outside.
Pros and Cons of Hybrid Appraisals
There are positive aspects and potential drawbacks to hybrid appraisals. Let’s take a look at the most important considerations:
What are the benefits of hybrid appraisals?
Hybrid appraisals are becoming more popular, primarily because they take advantage of an appraiser’s expertise. Hybrid appraisals allow appraisers to concentrate on what they’re good at: looking at comp data and valuing the home.
They also tend to be faster than traditional appraisals. A hybrid appraisal inspection typically takes 30 – 60 minutes. And it could take a week for the final hybrid appraisal report to come back. That’s still faster than a traditional appraisal’s time frame of 3 – 30 days.
What are the potential drawbacks of hybrid appraisals?
The main concern around the hybrid appraisal process is accuracy. An appraiser may not trust the third party to accurately record the home’s condition, style or other characteristics.
Third-party field inspectors may not have the credentials or licenses the appraiser has. Their expertise might be questionable and result in an inaccurate assessment of the home.
Times Are a-Changing in the World of Appraising
Home appraisals, like a lot of aspects of real estate, can change with local real estate markets or national events like a pandemic. And, depending on the availability of appraisal professionals in your area, hybrid appraisals can be more or less prevalent.
Check with your lender to learn more about the type of appraisal that will be used for your loan. Take the opportunity to ask any questions you may have about the process.
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National Mortgage News. “Mortgages without appraiser visits? Fannie Mae pilot asks why not.” Retrieved January 2022 from https://www.nationalmortgagenews.com/news/mortgages-without-appraiser-visits-fannie-mae-pilot-asks-why-not