Today’s blog was written by JVM’s Appraisal Manager, Taylor Allen. She orders our appraisals, manages our appraisal team, carefully curates and manages our huge stable of appraisers, reviews appraisals, rebuts appraisals, provides comparable sales data, and understands loan guidelines. How any firm operates successfully without someone like Taylor is completely beyond me.
As we talked about in this blog from early June (Inspection-Based Appraisal Waivers – Fannie Mae’s Latest Attempt To Eliminate Appraisers), the appraisal landscape has recently evolved with newer options adopted by Fannie Mae. Because there is so much confusion in the agent and borrower worlds when it comes to these new reports, I want to discuss the most common appraisal types, focusing on benefits and drawbacks. I also want to illuminate the one appraisal type to avoid at all costs.
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Full Appraisal – The safe choice
Full appraisals are the default option, and they involve an appraiser visiting the property for an interior and exterior inspection. That appraiser then analyzes market data and comparable sales to write up an appraisal report and give an appraised value. While it is the safest option, speed and cost can be an issue, especially in a crazy hot market like 2020 and 2021 (See: The Need For Speed; Appraisals Remain The Problem). Appraiser shortages can lead to delays, especially in rural areas.
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Property Inspection Waiver – Take it if you get one!
A property inspection waiver (See: Appraisal Waivers More Common Now; Here’s Why) means no appraisal is needed, saving time and money. The only possible issue is that there’s a slight chance of losing the waiver if loan terms or borrower qualifications change significantly. However, this is a rare occurrence and shouldn’t be a major concern.
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Inspection-Based Appraisal Waiver – Also great!
Like property inspection waivers, inspection-based waivers do not give an appraised value. With a property data inspection, a licensed property data collector inspects the property just like an appraiser would – which helps address the appraiser-scarcity issue. Instead of producing an appraisal report though, these data collectors instead write a property data collection report, which just lists a bunch of data points about the property. Nevertheless, like property inspection waivers, “inspection-based appraisal waiver status” may be “lost” if loan terms or borrower qualifications change significantly. This too is very rare, but if it happens, an appraisal report based on the collected data will be required.
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Desktop Appraisals – Probably best avoided
Desktop appraisals are done by an appraiser entirely using online data without an in-person inspection. These might suit rural areas with limited appraisers available, but there are concerns about accuracy, since the appraiser never sees the property. Desktop appraisers, for example, can often miss high-quality remodeling, updating, curb appeal or landscaping that can add significant value to a property. Given that desktop appraisals aren’t significantly cheaper or faster than full appraisals, JVM chooses to stick to full appraisals for accuracy.
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Hybrids – AVOID AT ALL COSTS!
Hybrids combine property data collection with an appraisal report, based solely on the data collected (and not upon an in-person inspection by the appraiser). These appraisal types might be useful in some rural areas or crazy hot market scenarios, but since there are two parts and two parties (property inspector and appraiser), there is twice the potential for delays. Also, there are some concerns about accuracy, since the appraiser still does not visit the property in person and is instead relying on the property data collector’s report. It is also impossible to rush Hybrid appraisals because of the two-part setup, which makes them a huge liability on fast closes. In our experience, Hybrids are too complicated, and they just compound the issues with other appraisal types – so they should be avoided no matter what.
It seems that Fannie Mae has increased the availability of inspection-based waivers, desktops, and hybrids in an attempt to address appraiser scarcity and modernize the process. But even so, the full appraisal remains our most commonly ordered option, and I believe it will stay that way for the foreseeable future.
Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
