Desktop Appraisal Assignments – A Practical Guide for Appraisers
Desktop Appraisal Assignments: A Practical Guide for Appraisers
In the face of a global pandemic that made personal property inspections unsafe, Freddie Mac and Fannie Mae (the GSEs) offered temporary flexibilities to address the needs of the industry.
These flexibilities – including desktop appraisals and exterior-only inspections (drive-by appraisals) – helped keep appraisers and borrowers safe, while offering efficient and effective valuation solutions that mitigate collateral risk.
Now, some two years since the onset of the COVID-19 pandemic, and months after the expiration of the temporary flexibilities, we’re making desktop appraisals more permanent.
Based on the successful performance of the offering, as announced in Single-Family Seller/Servicer Guide (Guide) Bulletin 2022-2, effective March 6, 2022, we’ve begun accepting desktop appraisals on certain purchase transaction loans.
What Does This Mean for Appraisers?
It means appraisers have another option at their disposal. For eligible loans, appraisers can rely on other data sources (like property tax records, multiple listing service information, past sales or prior appraisals) to develop a supported value opinion. It’s our hope this will provide appraisers with some flexibility and an opportunity for increased efficiency.
It also means that if an appraiser is completing a desktop appraisal, they’ll need to use appraisal Form 70D.
Let’s look at a few of the other considerations appraisers need to be aware of when completing desktop appraisal assignments.
Floor Plan Requirement and Building Sketch
The floor plan requirement is new – we’ve already received some questions about it. The floor plan is an important and integral part of helping appraisers identify any potential functional concerns related to the layout and can also help in understanding the breakdown of the gross living area (GLA) and square footage of the property.
The floor plan is different than the building sketch. The building sketch is an exterior drawing of the dwelling, while the floor plan is an interior detail of the dwelling’s layout that indicates interior walls and the flow of rooms.
What’s important to note, is that the floor plan is different than the building sketch. Most appraisers are familiar with the building sketch, an exterior drawing of the dwelling. On the other hand, the floor plan is an interior detail of the dwelling’s layout that includes interior walls and the flow of rooms. Windows, doors, bath fixtures, appliances and the like are not required in the floor plan, unless their location affects the appeal, marketability, or value of the property.
It’s also important to note that if an appraiser receives a floor plan from a third-party, it can be used to fulfill the requirement to provide a building sketch if it includes exterior dimensions that can be used to verify the subject property GLA.
Public Records – GLA
Speaking of GLA, as I’ve mentioned previously, it’s common for appraisers to run into situations where varying sources report different data for features, including the GLA. The same will likely be true when analyzing subject property data for a desktop appraisal assignment. In all cases, appraisers must analyze and reconcile data and decide which is most reliable. If credible subject property data is not available, the appraiser must upgrade the assignment to an interior and exterior inspection (traditional appraisal) – using appraisal Form 70.
Gaining Efficiency through Technology
When reliable information is available through technology platforms, it’s acceptable for appraisers to rely on the information for use with desktop appraisals. The Uniform Standards of Professional Appraisal Practice (USPAP) state that appraisers are permitted to consider and develop any information they deem to be credible – including from sources like third-party websites, remote mapping and floor plan technologies, or public record providers.
What if a Floor Plan Isn’t Available?
If a floor plan isn’t available for a property at the time of the assignment, the appraiser can’t complete a desktop appraisal and would need to move to a traditional interior and exterior inspection (Form 70). It is not Freddie Mac’s expectation that the appraiser (or anyone else) will have a floor plan independently created. We simply expect appraisers to make the appropriate decisions about the assignment based on the information and resources available to them.
Assuming Property Condition and Characteristics
It’s not acceptable to make assumptions about the condition of the property. Appraisers must obtain adequate and verifiable information about the subject property from credible sources when completing a desktop appraisal assignment. They must use data and verification sources they consider to be reliable, as they do with comparable sales. If those sources aren’t available, they must upgrade the assignment to a traditional appraisal.
At a minimum, desktop appraisals need to include the following photos of the subject property:
- Front view
- Rear view
- Street scene
- All bathrooms
- Main living area
It’s anticipated – and completely acceptable – that these photos will be obtained from online sources or listing information.
Appraiser Certification #10
One important difference to highlight between the use of desktop appraisals as a temporary COVID-19 flexibility and their use now that they’ve been added to the Guide, is the inclusion of Appraiser Certification #10 on Form 70D. Certification #10 was removed from the COVID-19 flexibilities to recognize the mitigating circumstances associated with the pandemic. Its inclusion in Form 70D means that appraisers must verify, from a disinterested source, all information in the report was provided by parties who have a financial interest in the sale or financing of the subject property.
More Options – Without Introducing More Risk
Freddie Mac is committed to reinforcing the integral role of appraisers and appraisals in the mortgage process, while also looking for opportunities to modernize the process and manage collateral risk. We’re doing this by developing new valuation methods and testing enhancements to existing solutions.
It’s our goal to purchase loans that are supported by the most reliable and appropriate valuation methods available to mitigate risk associated with default. We view the addition of the desktop appraisal option to our Guide as an important step on that journey.
It’s our goal to purchase loans that are supported by the most reliable and appropriate valuation methods available to mitigate the risk associated with default. We view the addition of the desktop appraisal option to our Guide as an important step on that journey; one that we hope will ultimately allow all stakeholders in the mortgage process to take advantage of efficiencies that maintain quality and save time.