There are many articles, blogs, and opinion papers that either support or reject bifurcated and hybrid appraisals, which contributes to a great deal of confusion. Here at McKissock Learning, we do not support any position regarding bifurcated and hybrid appraisals. Our goal is simply to provide illumination and help you understand the advantages and challenges of these appraisal services so that you can make well-informed decisions on whether to accept or reject a hybrid or bifurcated appraisal assignment.
In this post, we break down the definition of a bifurcated appraisal and explain why some argue that a better name for this type of appraisal service would be an “augmented” or “enhanced” desktop appraisal.
What is a bifurcated appraisal?
Merriam-Webster defines bifurcation as “the point at which something divides into two branches or parts.” Applying the term bifurcation to appraising would mean that the appraisal process is divided into two parts.
In the most general terms, a supervisory appraiser and appraiser trainee working on an appraisal may follow a bifurcated appraisal process. For example, a trainee may complete one part of the appraisal process, such as verifying the transaction data and pulling market trend data, while the inspection, analysis, development, and reporting are completed by the supervisory appraiser. Similarly, an appraisal firm may assign two appraisers to complete an appraisal assignment, with one appraiser completing the property inspection while the other appraiser completes the appraisal analysis, development, and reporting.
In real estate appraising, the widely used description of a bifurcated appraisal is typically applied to appraisals in which the property data collection (the property inspection) is separated from the development, analysis, and reporting of the assignment results. With this process, the appraiser completing the analysis and report relies on the physical property data collected by a third party who has completed an interior and/or exterior physical inspection of the subject property.
Essentially, the appraiser performing the development, analysis, and reporting of the assignment results is completing a desktop appraisal and relying on property data gathered from a third party. The term “desktop appraisal” is commonly understood to indicate an appraisal that is performed without the appraiser making any personal inspection of the subject property.
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Why call it an enhanced desktop appraisal?
The adjective “desktop” indicates the appraiser is completing the appraisal assignment using the information that is available at his or her desk. Information about the subject property’s relevant physical characteristics may be gathered by a third party inspector and sent to the appraiser, and/or the appraiser may be responsible for researching the subject property’s relevant characteristics using public records or other readily available sources. If a physical inspection is completed by a third-party, the appraisal service is typically classified as a bifurcated or hybrid appraisal.
Some argue that the terms “bifurcated” or “hybrid” are not really an accurate portrayal of this type of appraisal product. When completing a desktop appraisal, the appraiser relies on secondary data gathered by a third party. As a quick refresher, secondary data is information that is not gathered in its original form by the analyst, according to The Dictionary of Real Estate Appraisal 6th Ed. Secondary data sources include multiple listing service (MLS) data, data aggregators, public records, online sources, and a variety of other sources.
In a hybrid or bifurcated appraisal, a third party is observing the subject property’s physical characteristics and forwarding that information to the appraiser. Hence, some suggest that a more accurate portrayal is that of an “augmented” or an “enhanced” desktop appraisal.
The terms “augmented” or “enhanced” reflect that this secondary data as gathered through an inspection is likely an improvement over the conventional data sources relied upon in completing a desktop appraisal. On balance, the data gathered through a property inspection is likely to be more current and less biased than if an appraiser relies on public record data which may be dated or MLS information that may be biased as it includes marketing puffery. Public records may not be updated on a regular and timely basis, and it is not uncommon for a listing real estate agent to inflate the features of a property and ignore conditions that do not reflect well on the property.
For instance, an appraiser relies on MLS data on the subject property that is from a two-year-old listing. The property is listed as a 4-bedroom home. Since the property was listed, the homeowners removed a wall between the two smaller bedrooms and created a large third bedroom, so the house is now a 3-bedroom home. By having current property information from a third party person who completed a physical inspection, the appraiser may make a different decision than if the subject was a 4-bedroom home as listed two years prior. The appraiser may select different comparable sales and she may attempt to confirm whether a permit was granted to remove the original shared wall. Or the appraiser may suggest that the appraisal product be upgraded to a traditional full appraisal and personally inspected by the appraiser to understand if the bedroom reconfiguration has any impact on the property’s marketability and functional utility.
The advantage of having an inspection completed is that the appraiser now has current information that may not have readily been available or known if a desktop appraisal was completed with no interior inspection. For this reason, some argue that a bifurcated appraisal in this sense may be better identified as an “augmented” or an “enhanced” desktop appraisal.
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Written by Jo Traut. Jo A. Traut is an appraisal curriculum and content specialist at McKissock Learning. She is a real estate appraisal and valuation compliance professional with over 20 years experience in residential appraising, operations management, risk analysis, quality assurance, and appraisal regulations.