{"id":15488,"date":"2020-03-31T14:52:14","date_gmt":"2020-03-31T21:52:14","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=15488"},"modified":"2021-07-16T09:38:23","modified_gmt":"2021-07-16T16:38:23","slug":"agent-coronavirus-alternative-appraisal-methods","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/agent-coronavirus-alternative-appraisal-methods\/","title":{"rendered":"Alternative Appraisals During the Coronavirus Pandemic: What Are Your Options?"},"content":{"rendered":"

You might have heard that the Federal Housing Finance Administration (FHFA) has relaxed standards for appraisals<\/a>. It\u2019s hard to comply with social distancing rules when performing a traditional inspection, and appraisers might be reluctant to potentially expose themselves to COVID-19. Therefore, the FHFA authorized coronavirus alternative appraisal methods<\/a>.<\/p>\n

Even though alternative appraisal methods have been authorized, Tom Cullen of Cullen Real Estate and Appraisal<\/a>, an appraiser certified by the national Appraisal Institute, says that \u201cthe scope of the appraisal methodology and reporting requirements are always to meet appropriate regulatory guidelines such as those set forth in the Uniform Standards of Professional Appraisal Practice (USPAP).\u201d You can rest assured that your appraiser will still return an accurate value.<\/p>\n

While these rules only apply to mortgages issued through Fannie Mae and Freddie Mac, other lenders tend to follow their lead. What do you need to know about alternative appraisals as a real estate agent<\/a> or homebuyer<\/a>?<\/p>\n

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Source: (Jonas Leupe \/ Unsplash)<\/figcaption><\/figure>\n

You\u2019ll still need an appraisal<\/h2>\n

As strange as the current situation may feel, this isn\u2019t the Wild West. You\u2019ll still need an appraisal<\/a> to secure the mortgage loan. The new home serves as collateral for the mortgage, and lenders use this requirement to protect themselves from loaning more on a home than it\u2019s worth.<\/p>\n

But, the appraisal probably won\u2019t be the 1004 that is normally required. A 1004 appraisal requires an on-site inspection by an appraiser, in addition to other valuation methodologies, such as pulling comps<\/a>. Due to social distancing, self-isolation, and quarantine from the coronavirus pandemic, these won\u2019t be required on transactions through at least May 17, 2020.<\/p>\n

Because of the current situation, appraisers who are still performing in-person inspections are requesting that the homeowner vacate the home, and they are wearing masks and gloves. Justin Woodall<\/a>, an Athens, Georgia agent who sells 87% more single family homes than his peers, just had a situation where the current tenants wouldn\u2019t allow the appraiser into the property unless they wore protective gear. With situations like this occurring more frequently, and shortages of these items, alternative appraisals will become necessary.<\/p>\n

The alternative options for appraisals<\/h2>\n

When on-site appraisals aren\u2019t an option, the industry has developed two alternatives: desktop appraisals or hybrid appraisals. According to Tom Cullen, \u201cThere are and always have been alternative appraisal methods. Depending on the loan amount, loan to value ratio (LTV), borrower creditworthiness, and overall perceived risk to the lender, it is fairly common for a lender to require an alternative appraisal method, such as an exterior-only (drive-by) hybrid appraisal or desktop appraisal.\u201d<\/p>\n

Alternative appraisals have been common in the real estate industry, and if you choose an experienced appraiser, you should have no issue getting the appraisal you need for a mortgage<\/a>.<\/p>\n

Desktop appraisals<\/h3>\n

With a desktop appraisal, the appraiser never leaves their desk. A licensed appraiser does market research, pulls comps, and determines how much the subject property is worth \u2014 without ever visiting it. They\u2019ll use tax and MLS records to guide their decision.<\/p>\n

Now, more than ever, it\u2019s important to pay attention to other recent sales when making an offer<\/a>. In the past, if the buyer offered considerably more than other properties in the neighborhood had sold for, the appraiser could potentially find a justification for the home\u2019s higher worth (a pool, fancy kitchen remodel, or additional garage space). But now, without an in-person visit, the offer price should be close to the neighborhood\u2019s standard, or the buyer risks losing financing.<\/p>\n

Hybrid appraisals<\/h3>\n

A hybrid appraisal combines a desktop appraisal with other inputs to gauge a home\u2019s value. A licensed appraiser performs a desktop appraisal \u2014 but also uses some additional resources to help them determine the home\u2019s condition.<\/p>\n

These resources might include:<\/p>\n