As part of the government sponsored enterprise (GSE) appraisal modernization program, you may be asked to complete desktop appraisals rather than an appraisal with a personal inspection as they are increasingly common requests.
The GSEs wanted to modernize appraisal processes to cut down on turnaround time and lower costs for the borrower, and with readily available data sources, including public records, appraisers can complete appraisals without having to visit the property. Understanding the specifics of desktop appraisals will help you complete them effectively and maintain high-quality standards, so we wanted to take the opportunity to address common questions and share best practices.
Summary
A desktop appraisal allows appraisers to determine a property’s value and write a report without an on-site inspection. These are often used in low-risk assignments, such as a refinance or insurance assessment. When completing a desktop appraisal, make sure your data is reliable, accurate, and timely, and follow USPAP rules and best practices.
What is a desktop appraisal?
If you’re a new appraiser, a desktop appraisal is an appraisal assignment where you use available information and data rather than performing a personal inspection of the property. Appraisers identify physical characteristics of the subject property through remote research. Despite not conducting a physical inspection, you can still assess crucial characteristics, like location, size, condition, amenities, and other factors affecting marketability and appeal.
Appraisers can use a variety of resources, including:
- Tax assessments
- Recorder’s records
- MLS data or public databases
- Data aggregators
- Improvement or renovation permits
- Aerial or satellite maps
- Floor plans depicting room layouts
The precedent leading to desktop appraisals
Identifying property characteristics and completing appraisals without a personal inspection is not a new concept. Retrospective appraisals, drive-by (exterior inspection) appraisals, and valuations from plans and specifications, are all valuation assignments where an appraiser develops an appraisal opinion without personally inspecting the property.
While not the exact same, appraisers generally use the cited sources above to identify the physical characteristics of comparable sales in their appraisals. It’s fair to say that identifying the physical characteristics of the subject property in a desktop appraisal is a similar process to verifying comparable sales.
When do desktop appraisals make sense?
While they won’t replace a full appraisal for a majority of property transactions, desktop appraisals can offer a more efficient and cost-saving alternative. They are often used in low-risk scenarios and non-GSE appraisal assignments, such as:
- Lower-risk transactions: In certain cases, a lender may request a desktop appraisal for lower-risk transactions, such as a low loan-to-value (LTV) ratio loan.
- Refinance loans: Lenders may order desktop appraisals for refinancing transactions, especially if the borrower has sufficient equity and a recent appraisal has been completed.
- Portfolio management: Lenders managing large portfolios of loans may use desktop appraisals as a cost-effective method to monitor and evaluate the collateral value of properties in their portfolio.
- Helping sellers determine a price: A desktop appraisal provides sellers with valuable insights into their property’s market value, helping them make informed decisions when determining an appropriate listing price.
- Home equity lines of credit (HELOCs): When homeowners apply for HELOCs, lenders may request desktop appraisals to ascertain the property’s value and determine the credit limit without requiring a full appraisal.
- Tax Appeal Support: When there is a challenge to a tax assessment, a desktop appraisal may be used to provide a current market value.
- Insurance purposes: Lenders or other clients may order desktop appraisals for insurance purposes to determine the property’s replacement cost or insurable value.
- Managing Investments: For investors who own multiple properties, desktop appraisals provide rapid updates on property values.
Level of property inspection in a desktop appraisal
According to USPAP, appraisers must conduct a scope of work that yields credible assignment results. The appraiser responsible for the analysis should also complete a personal inspection of the subject property in certain scenarios, including where properties are:
- Non-conforming or unique
- Situated in areas with limited market activity or data availability
- Located in highly volatile markets
- Exhibiting indicators of potential deficiency or functional obsolescence
5 Tips for a successful desktop appraisal
Desktop appraisals offer a streamlined way to determine property value but getting them right takes more than just clicking a few buttons. You need a smart approach to ensure your desktop appraisals are accurate and persuasive. Use these five tips to ensure you meet these goals.
1. Know your limits
Start with the basics
First, determine if the property type and assignment is suitable for a desktop appraisal. Complex properties and complex assignments might be poor candidates.
Market matters
In volatile markets with rapid price fluctuations, existing data quickly becomes less reliable, making a more comprehensive appraisal approach such as an exterior-inspection, a hybrid, or a full appraisal, preferable.
Regulations and guidelines
Research state-specific requirements for any limitations or restrictions regarding desktop appraisals. Also, make sure you thoroughly understand the guidelines set forth by the intended user, use, or client, including requirements for photos and exhibits, allowance of extraordinary assumptions, and any other specific instructions pertaining to the desktop appraisal process.
2. Maximize the data
Beyond the basics
Tax records and MLS data are just the start of your research. Seek additional sources like
- Building permits for renovations
- Floorplans
- Recent aerial photos
- Neighborhood-specific information
- GIS maps
- Zoning records
- Historical sales data.
Data quality check
When conducting a data quality check, be transparent about the available information and any potential limitations it may present. You should evaluate the reliability of a data source to determine if it is accurate, trustworthy, timely, as well as objective, impartial, and credible.
Embrace technology
Specialized integrated software tools designed for desktop appraisals may help aggregate data and streamline analysis, including market conditions, and property characteristics. It is crucial for you to understand the functionality of the integrated tool and ensure that if the tool’s analytics are utilized in the appraisal process, the resulting outcomes are credible.
3. Evaluate your competency
Comfort in familiarity
Determine your competency to complete the specific desktop appraisal assignment. Are you experienced in the particular property type and methodology, and have you successfully completed other valuation assignments with the same intended purpose?
Know the market
Most appraisers would agree that when it comes to completing a desktop appraisal, you must already have prior appraisal experience and knowledge of the subject’s market area.
Asking for assistance
Ask yourself if you will you need significant assistance to credibly complete the appraisal assignment. If so, recognize that certain desktop assignments necessitate the appraiser’s competence prior to acceptance, and you may have to decline the assignment. If you need significant assistance from an appraiser and it is allowed, be sure to disclose who provided significant assistance and set forth the extent of the assistance in the appraisal report.
4. Communication is key
Set expectations
When working with non-lender clients, clearly explain what a desktop appraisal entails, and its potential limitations compared to a full appraisal.
Highlight data availability
During the reconciliation process, articulate not only the utilized data sources but also specify the quantity and type of data accessible, along with any limitations encountered in cases of limited data availability. Disclose what sources were used to verify the data, the date of the source(s), and to what degree the data was verified.
Report clearly
Document your process and findings so the lender or client can follow your reasoning and understand the basis for your valuation. Compose the necessary disclaimers and a summary of the scope of work required in desktop appraisal reports to remain in compliance with USPAP’s reporting requirements. The certification must clearly state that the signing appraiser has not personally inspected the subject property
5. Beyond the form
Follow standards
If you are using a proprietary desktop form, compare the form to the minimum USPAP report requirements for the applicable report: Appraisal Report or Restricted Appraisal Report and be prepared to supplement the form as neededThe devil is in the details: Review the preprinted language, the limiting conditions, boilerplate language, the intended use and intended users, and certification to confirm it is compliant with USPAP and that you are comfortable with the form or that you can supplement and/or modify the form as necessary to be compliant.
Manage risk
Clearly and conspicuously disclose the scope of work including what was not done as well as what was done. Add disclaimer language that the appraiser is not responsible for the appraisal being relied on by parties that are not identified as intended users by the appraiser or that relied on the appraisal for any use other than the intended use described in the report.
Take a closer look with CE courses
If you want to learn more about desktop appraisals and other types of non-traditional appraisals, McKissock Learning has the continuing education appraisal courses you need to gain new skills (and fulfill state requirements).
- Divorce and Estate Appraisals: Elements of Non-Lender Work
- Best Practices for Completing Bifurcated and Hybrid Appraisals
Get complete access to our course library with the Unlimited CE Membership
With the Unlimited CE Membership, you can gain a variety of new skills to help you gain new business, diversify your revenue, and stay up-to-date on all the latest information you need to know. You’ll get full access to our entire CE course catalog, courses to earn sought-after certifications, and also our large Learning Library with over 400 resources.
Learn more about McKissock’s Unlimited CE Membership
Desktop Appraisal FAQs
What is a desktop appraisal?
A desktop appraisal is a property valuation completed remotely by the appraiser using documented data like public records, Multiple Listing Service (MLS) listings, aerial views, and other secondary data resources instead of conducting a personal inspection.
What is the difference between a desktop and a full appraisal?
A full appraisal requires the appraiser to complete a personal interior and exterior inspection. On the flip side, a desktop appraisal does not include a personal inspection and relies solely on existing documentation and secondary data about the property’s physical characteristics .
Does anyone complete any on-site inspection for a desktop appraisal?
The appraiser does not complete a personal inspection of the subject property. Instead, data regarding the property’s characteristics may be gathered from a variety of data sources, including interested third parties such as the homeowner, builder, or the buyer/seller agent. The appraiser may also use secondary data sources including public records, MLS, internet, prior appraisals, building permits, satellite imagery, etc.
When do appraisers use desktop valuations?
Appraisers have the flexibility to apply different scopes of work to different types of valuation assignments, but they must ensure that the scope of work is sufficient to achieve credible results. Remember that credibility is always judged within the context of the intended use and the type of value.
No inspection of the subject may be appropriate for an appraisal review assignment where the client is asking the review appraiser to review the sales comparison approach and the reviewer is to assume that all data reported about the subject property is reliable.
Other examples include lenders making small loans (e.g. home equity loans) or in the case of hostile homeowners (e.g. pre-foreclosure appraisals).
Desktop appraisals can be used for a variety of appraisal assignments including, but not limited to:
- Refinances with recent existing inspection data available
- Portfolio benchmarking for investors
- Divorce and estate planning perspectives
- Rapid estimates for investment analysis
- Appraisal quality monitoring by a GSE
- Pre-foreclosure valuations
How credible are desktop appraisal values?
Desktop appraisals can attain credibility comparable to full appraisals provided there is access to reliable and reasonably accurate data regarding the subject property. Nonetheless, the absence of a current property inspection poses a risk, leaving uncertainties regarding potential structural, safety, or livability issues. Consequently, desktop appraisals are commonly employed in lower-risk situations, particularly when a recent property inspection has been conducted, or accessibility to the property is impractical or not possible.
How do desktop appraisals differ from hybrid approaches?
When estimating property values, appraisers employ various types of inspection approaches:
Desktop Appraisals
The adjective “desktop” indicates the appraiser is completing the appraisal assignment using the information that is available at the appraiser’s desk. The appraiser is responsible for researching the subject property’s relevant characteristics using public records or other readily available sources.
Hybrid Appraisals
If a physical inspection is completed by a third-party, the appraisal service is typically classified as a bifurcated or hybrid appraisal. In real estate appraising, the widely used description of a hybrid 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 exterior physical inspection of the subject property. In a hybrid appraisal, a third party observes the subject property’s physical characteristics, and that information is forwarded to the appraiser.
