Fannie Mae and Freddie Mac both announced earlier this year the implementation of the use of Desktop Appraisals beginning in March. There has been much discussion and questions regarding these products so I thought I would share some information and thoughts on the topic.
Why would the GSEs want this product?
- Appraisal Modernization- Many in the industry are trying to move the appraisal industry to modernize with the use of technology and data gathering services. If anyone has been in the appraisal industry for a while they do know that it has been changing with technology. Appraisers no longer use typewriters, fax machines, or one-hour photo labs. As technology has evolved we have much greater access to data and appraisers are learning to adapt and use this technology. Many believe that the use of different data gathering tools and sources will help modernize the appraisal process.
- Covid19 Response- As the pandemic hit, the GSEs implemented the Covid Flexibities that appraisers could perform desktop appraisals so that they would not have to go into the homes for the safety of the homeowners and appraisers. The appraisers were able to perform these appraisals using photos either provided by the homeowner or from recent photos available on the MLS. If the appraiser was confident that the data was reliable, they would complete the appraisal as a desktop using the Covid Flexibilities, which had a different scope of work and certifications. The GSEs determined that these products were good and have decided to make them a permanent option.
- Efficiency- as the recent spike in the demand for appraisal services peaked and there seemed to be a bottleneck in the time to get appraisals completed. This process is seen by some to be a time saver as the appraiser would no longer have to spend the time driving to the property and taking comparable photos.
Differences in Appraisal Products
There are many different types of appraisals, a full appraisal, a drive-by appraisal, desktop appraisals, and hybrids. Many have been confused about the differences between Desktop Appraisals and Hybrid Appraisals.
It is my understanding that the Hybrid Appraisals use data provided by third parties and that for the Desktop appraisals the appraiser determines if there is enough data available from reliable sources to perform the appraisal. The appraiser may be able to use remote tools to view or sketch the property. Both Desktop and Hybrid appraisals require a floorplan rather than a traditional sketch from the appraiser. Here is a good reference from FNMA & Freddie Mac: URAR Hybrid and Desktop Appraisal Forms
Dave Towne, Certified Residential Real Estate Appraiser; owner of Appraiser Education Service, recently wrote an article published in Working RE that discusses some of the differences between the Full, Desktop, and Hybrids as well as questions around them.
Tools for Desktops/Hybrids
Some of the current new tools and technology that I am aware of that assist with Desktops and Hybrids are:
RemoteVal- This tool is a free app from Incenter that allows the appraiser and homeowner to inspect, view, measure, and take pictures of a property remotely.
Cubicasa– Allows appraisers or trainees or third parties to sketch a floor plan of a house using technology from a phone or tablet.
INvision Capture– This tool from Class Valuation provides a floor plan and sketch to ANSI standards.
Homeview Inspection Tool- This tool from Valuelink provides an inspection tool to view a property and take photos.
InsideMaps– A tool that provides mapping, sketches, and tours of homes. This tool is not free and pricing is based on the size of the home.
These are just a few that I am aware of and I am sure that the technology will improve and other companies may provide these tools if there is a demand.
Not All Properties Qualify
It is important to note that these desktops will not be available for every property. Per FNMA Selling Guide:
To be eligible for a desktop appraisal, transactions must meet the following criteria:
- one-unit property (including those with an ADU and units in a PUD),
- principal residence,
- purchase transaction (including new construction),
- LTV ratio less than or equal to 90%, and
- DU loan casefile that receives an Approve/Eligible recommendation.
The following transactions are not eligible for a desktop appraisal:
- two- to four-unit properties;
- condo and co-op units;
- manufactured homes;
- construction-to-permanent loans (single-close and two-close);
- second homes and investment properties;
- all refinances;
- HomeReady, HomeStyle Renovation, and HomeStyle Energy loans;
- Community Seconds with a subsidized sales price;
- Community land trusts, or other properties with resale restrictions (loan casefiles using the Affordable LTV feature);
- DU loan casefiles that receive an Ineligible recommendation; and
- manually underwritten loans.
Acceptance of Desktops & Hybrids
Although the FNMA & FreddieMac have accepted these products there some questions many appraisers have.
- Concerns over the lack of a physical inspection– Many appraisers are concerned about the lack of a physical inspection. What about foul odors? Cracks in foundations or unstable floors when walking on them. Appraisers have been trained in knowing what to look for. If the property information is being provided from a third party are they trained? How can appraisers know that some of the areas of a property are not being shown?
- Concerns over liability– Appraisers are the ones signing the report. Many appraisers are not comfortable performing these assignments as they are the one that assumes the liability. Many are not confident knowing that the data provided such a condition or size of the property is accurate. Without confidence in the accuracy of the data, many appraisers will not choose to perform them.
- Concerns over fees & time- Many appraisers do not think that these products will save time. There will be additional time spent verifying the accuracy of the data provided. I know that for me personally, as more and more data has been made available to me on an assignment, the more discrepancies I find, therefore additional time is needed to confirm the accuracy. Many are thinking that fees will be too low for the additional liability and time needed.
What Do You Think?
This is a great time and opportunity for appraisers to weigh in on how they feel about these products. Will you do them? Why or why not? Here are a few surveys available that I am aware of. Please let me know if there are others.
Working RE: Desktop and Hybrid Appraisal Survey (surveymonkey.com)
Bradford Technologies: New GSE Desktop Appraisal Survey (surveymonkey.com)
To me, the verification of data is going to be essential to have confidence in the appraisal. The more data we get the more important the verification of the data becomes. It is my understanding that the appraiser will be assuming all liability. I already have a hard time reconciling discrepancies in data between CAD & CoreLogic/Realist data so additional time will be needed for this. I also foresee additional time with the tool where the appraiser guides the homeowner. It seems like too many things can be missed, such as foundation issues or smell. If a realtor or homeowner provides the data then that would not be an uninterested party.
At this time, the majority of our work is rural and complex and we don’t anticipate that these would qualify for this type of assignment. I do see that perhaps these might work if you were to take on a trainee and the trainee was able to do the inspection and use the tools for a floorplan. This solution might help appraisers’ liability concerns as they would trust someone that they trained and help incentivize appraisers to take on a trainee.
Informational Posts about Desktops & Hybrids
Policy Update- Desktops and ANSI Square Footage Calculation– Appraisal Institue
Desktop to Become the New Norm– Working RE Magazine
About Desktop Appraisals– Fannie Mae
A View on Risk- Desktop Appraisals– Appraisal Buzz
Desktop Appraisals- What are They and Will You Do Those Assignments? -Working RE Magazine
The Appraiser Trainee- The Solution that Has Been Avoided– Skap The Appraiser