The mortgage industry is on its way to modernizing the appraisal process. In early February, Fannie Mae and Freddie Mac, the government-sponsored entities (GSEs), incorporated desktop appraisals into their Selling Guides beginning in March 2022. But what is a desktop appraisal, how does it work, and how does it compare to a full appraisal? Keep reading to understand the new guidelines and what they mean for the mortgage industry.
What is a desktop appraisal? Desktop appraisal meaning and definition
A desktop appraisal, also known as an appraisal without an onsite inspection, is a faster way to complete an appraisal for a home loan. These appraisals often use robust digital software to analyze property data from public records. Appraisers use various public records like tax records, multiple listing service (MLS), property photos, a floor plan with interior walls, gross living area (GLA) calculations, and other data to complete a thorough report. This process is done from an appraiser’s desk, hence the name.
Testing with the COVID-19 desktop showed similar risk performance when compared to traditional appraisals, and the 1004 Desktop guidelines announced today go even further to mitigate risk.
Desktop appraisal vs. full appraisal: What are the differences?
There are several differences between a full appraisal and a desktop appraisal. In traditional appraisals, an appraiser visits the property to complete an inspection to collect property data to assist in determining the home’s value. Appraisers take photos, measure for square footage, evaluate the property’s condition, and use various public data sources to develop an opinion of value.
With a desktop valuation, appraisers use extensive data gathered by third parties and public records in place of a physical inspection to complete the appraisal. Third parties collecting property data can use mobile software to generate digital GLA, a floor plan with interior walls, and compile all the data needed for the appraiser to execute a credible, GSE-compliant appraisal.
While full appraisals are approved for all types of mortgage loans, including second homes and commercial properties, desktop appraisals are only available for single-family home purchase loans. However, desktop appraisals are often quicker for lenders and appraisers who want a more expedited process than a traditional appraisal.
What are some of the benefits of desktop appraisals?
Desktop appraisals present many benefits to lenders, appraisers, and homebuyers alike, including:
- Speed – Desktop appraisals enable an appraisal process that is nearly 50% faster than a full appraisal without sacrificing quality or thoroughness.
- Consistency – Standardizing property data collection processes can drive appraisal consistency nationwide.
- Closing time – Using this quicker appraisal method, lenders may schedule earlier closing dates for borrowers.
- Availability – Shorter turn times for appraisers can help ease appraiser capacity restraints, enabling more appraisals to be completed.
When should a desktop appraisal be used?
Desktop appraisals are a reliable solution for many new purchase home appraisals. If a home is in average condition and isn’t complex to value, a desktop appraisal is the right choice for the job. However, if a home is newly upgraded or in poor condition, a traditional appraisal may be a better option.
HousingWire reports that according to Fannie Mae, “the loan must be a purchase transaction, secured by a one-unit principal residence and have a loan-to-value ratio of no more than 90%.” This stipulation opens the door to performing desktop appraisals for most new purchase homes.
Keep in mind that these new appraisals are currently not an option for a second home or investment property loan. Additionally, if a cash-out refinance is occurring, the loan is for construction or renovation, and for multi-unit properties, condos, co-op, or manufactured homes, you cannot use a desktop appraisal.
If the appraiser does not have adequate information to complete a desktop appraisal based on the property data collected by a home inspector, public records, the homeowner, or other online tools, a full appraisal should be completed.
How to take advantage of desktop appraisals
Desktop appraisals are a great option for those looking to save time on their property appraisal. These appraisals are much faster than traditional appraisals, which saves both lenders and appraisers time.
Clear Capital is here to help you unlock the power of these appraisals. We have the technology, trained network of property data collectors, and experienced appraisers that lenders need to seamlessly adapt to the change.
If you’re interested in desktop appraisal solutions, visit this webpage or give us a call at 530-550-2525. Whether you need a complete GSE-compliant desktop appraisal or simply the floor plan and property data to execute one, our Desktop Appraisals and Desktop Data Collection services are unmatched in the mortgage industry. Take advantage of desktop appraisals today!
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