SPECIAL SECTION: THE STATE OF APPRAISALS & VALUATION
Desktop And Drive-By Appraisals: Helpful Or Harmful? The key is to pair them with the right circumstances BY ADAM JOHNSTON | SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL
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re desktop and driveby appraisals helpful or harmful? In short, maybe, it depends, sort of … “I’m busy right now, can I have ketchup with that?” Frankly, there’s no simple answer to the question of desktop and driveby “goodness.” They are what they are, as in both have potential benefits and risks. The key is to pair them with the right circumstances and effective risk controls. For background, desktop appraisal is a general term that describes real estate appraisals completed by licensed appraisers without visiting the subject property. Drive-by appraisals/exterior-only appraisals generally refer to real estate appraisals that include an appraiser’s in-person observation of the subject property from the street but exclude an actual on-site or interior inspection. Recently, desktop and drive-by appraisals temporarily replaced many interior inspection appraisals as a necessary response to health risks and quarantine orders related to the COVID-19 pandemic. This adaptation was necessary to protect the wellbeing of homeowners and appraisers, while keeping the mortgage process moving; allowing professional appraisers to continue as the trusted backbone of property valuation.
I’M A LOAN OFFICER, HOW CAN I BE SUCCESSFUL WITH DRIVE-BY AND DESKTOP APPRAISALS? If you’re a loan officer, the availability of desktop and drive-by appraisals during the social distancing and stay-
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at-home requirements associated with COVID-19 are a net positive. There are a few primary reasons for this: • Desktop and drive-by appraisals have enabled the mortgage lending process to continue and the mortgage industry to continue receiving appraisals completed by professional appraisers. • Desktop and drive-by appraisals are generally less expensive than appraisals requiring an interior inspection, thus saving your borrower money. • Desktop and drive-by appraisals are generally completed more quickly than appraisals requiring an interior inspection. Since there is no inspection, the complication of an appointment is removed, which may result in improved turn-time for receipt of the appraisal. Also, for a refinance, this may save a borrower the inconvenience of taking time off for the appointment. A downside of desktop and driveby appraisals is that the appraiser typically lacks current and personally verifiable details about the property’s interior. On a purchase transaction, this is somewhat mitigated by recent pictures and/or video tours of the interior of the home which are typically available from websites or the local multiple listing service. Even so, such pictures are not equivalent to a personal inspection since they represent limited and curated views of the interior. Unfortunately, on a refinance or purchase transaction without current online photos, the appraiser is often left to rely on public record data (i.e.
| NATIONAL MORTGAGE PROFESSIONAL MAGAZINE
Adam Johnston is director of operations and chief appraiser for Genworth Financial’s U.S. mortgage insurance business and has 25 years of appraisal experience.
county/town assessor) for information about the subject property. Since public record data is typically sparse on details about the interior condition, quality and features, the appraiser may be unaware of significant updating, renovation, and other items important to property value. This limitation may result in a borrower being dissatisfied with the appraisal and feeling that important updates and/or features were left out. Fortunately, there are things a loan officer can do to reduce the risk of borrower dissatisfaction with desktop or drive-by appraisals, particularly on a refinance transaction where the appraiser is unlikely to have photos of the interior from a third party. 1. Be candid with your borrower about the limitations of the drive-by or desktop appraisal. Using the information above, educate the borrower on why the desktop or drive-by is important, while explaining the downside