If you’re involved in the real estate industry in any way, you may have seen them or heard about them by now.
They provide a quick estimate of property value without a hefty price tag.
Homeowners, brokers, lenders, developers, and investors all use them.
And no they aren’t restricted appraisal reports.
So what am I talking about?
What is a desktop appraisal?
The name pretty much gives it away.
Separate the two words and you get “desktop” and “appraisal.” You can see where I’m going with this.
A desktop appraisal is an appraisal that is done at a desk, without leaving the desk.
There’s no interior inspection, no exterior inspection, and no measuring.
Nothing is done in person.
Desktop appraisals use the data available to the appraiser via third-party resources.
MLS, Public Records, and Google Maps are the main three that come to mind, but there are plenty more out there.
Only a licensed or certified appraiser can perform a desktop appraisal.
And they are not the same thing as restricted appraisals or BPO’s (Broker price opinions).
They are full appraisal reports that can be used for many purposes.
Desktop appraisal vs desktop valuation
You may be wondering now what the difference is between a desktop appraisal and a desktop valuation.
You probably have heard both terms because they are often used interchangeably. They are essentially the same thing.
A desktop valuation refers to the process of performing a desktop appraisal. A desktop appraisal refers to the appraisal itself.
The two terms can be used in place of one another, but I prefer to call the appraisal an appraisal and the process a valuation.
Desktop appraisals vs. full appraisals
Now that you know the basics, let’s compare desktop appraisals to full appraisals.
But without getting too in depth quite yet, I’ll simplify it first.
A desktop appraisal is the same as a full appraisal but without the inspection.
Now let’s break it down.
Desktop appraisals are appraisals that are completed without a physical inspection.
That means there is no measuring, photos, or evaluation done in person.
The same property analysis occurs in the report, but the data comes from third-party sources.
As you might be able to conclude already, this can result in a lack of accuracy for many types of properties.
This inaccuracy might involve properties with:
- Insufficient data
- Incorrect data
- Complex or hidden attributes
- Lack of similar comparables
With that being said, they also have their perks for many other properties.
These might include properties:
- In tract neighborhoods
- In average condition
- With plenty of data
- With plenty of comparables
Desktop appraisals work great with “cookie cutter” homes in planned developments, but not as well with unique properties.
Here is an example of a property that a desktop appraisal would not work well with:
Here is an example of a property that a desktop appraisal would work well with:
Now that you know when and when not to use a desktop appraisal let’s compare them to a full appraisal.
A full appraisal is very similar in that it involves the same research and comparable selection.
But, a full appraisal has the added benefit of an in-person inspection of the property.
A desktop appraisal does not.
The inspection allows the appraiser to see the property in real time.
This is great because the inspection date is usually the effective date of the appraisal.
With a physical inspection of the property, an appraiser can see the property for what it truly is.
This way, the appraiser doesn’t have to rely on third-party data that may or may not be accurate.
Without inspecting a property, you may miss major deferred maintenance or expensive upgrades.
Online data may not show that the property has a pool or a 1,000 square foot addition in the rear.
An inspection will reveal all that.
And that’s really where the difference between the two comes to play.
Accuracy is the main concern when comparing a desktop appraisal to a full one.
Don’t get me wrong; a desktop appraisal can be close to as accurate as a full one if there is enough data available.
But, if data on the subject isn’t available, then the appraiser might as well be pulling a number out of thin air.
This is why desktop appraisals aren’t typically used by traditional lenders.
With that being said, as the internet ages, data becomes more and more prevalent.
There are hundreds of sites out there that house real estate data.
Sites like Zillow pull all their information from real MLS listings, so you don’t even need access to the local MLS.
Public record data is available online.
An entire property can be measured on Google Maps.
Google Street View allows an appraiser to see the property from the street. Google Maps even has a 3D option so that you can “fly” around the property as if you were a drone.
With the constant release of new data sources, accuracy becomes less and less of an issue.
And with the availability of new data, desktop appraisals become more and more popular.
When comparing a desktop to a full appraisal, the benefits might not be apparent. But, they have their perks.
Desktop appraisals serve best as a way to get a quick estimate of value.
They are much cheaper than a full appraisal, and the turnaround time is much quicker.
The price of a desktop appraisal can be as low as half the price of a full appraisal, and the turn time could be even less.
For this reason, hard money lenders love desktop appraisals. Same with investors looking for a value before they buy (or sell) property.
Anybody that needs a quick value on a property should consider a desktop appraisal over a full one.
If there are so many benefits, then there have to be drawbacks as well.
Accuracy is the only drawback when it comes to desktop appraisals.
The property is never inspected by the appraiser, so they can never be as accurate.
This means that a lot of assumptions have to be made about the property.
While this might not matter as much for some users, other users might shy away for this reason.
With that being said, I would say that 75% of the time or more, there is enough information for an appraiser to get a somewhat accurate value.
Which one is right for me?
It all depends on what the intended use of the appraisal is, and who the intended user is.
If you are looking to refinance your property through a bank, then a desktop appraisal probably won’t fly.
But, if you are an investor looking for a quick value, and the data is there, then get a desktop appraisal all day long.
As you can see, desktop appraisals are a great way to see what your property is worth, if all you need is a quick value.
They are cheap, fast to complete, and can be close to as accurate as a full appraisal if the data is available.
While they are not ever going to stand up to a full appraisal, desktop appraisals are here to stay.
In fact, they are only becoming more popular as companies accept how much data is available.
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