Gather round, curious souls, because there's something new lurking in the world of property appraisals. For those unaware, let me conjure up the latest trend—desktop appraisals, where your home gets valued without anyone stepping through the door... or so it seems!
But don’t worry, no tricks here—just the treat of modern technology making property valuations easier than ever. Desktop appraisals are a modern, efficient way to have your home appraised without requiring an in-person visit. Instead of a physical walkthrough, these appraisals rely on public data, MLS listings, floor plans, and homeowner-provided photos and videos to assess a property's value.
This data-driven approach saves time and reduces costs while maintaining accuracy—but only if the property is the right fit, and only if data science techniques are employed to provide meaningful insights.
Enter the first, freakishly large government-sponsored entity to adopt desktop appraisals. While it may sound a bit eerie, it was actually the next logical step in using technology to make property valuations more efficient and reliable.
Fannie Mae and the Rise of Desktop Appraisals
During the COVID-19 pandemic, the demand for appraisals surged. With a shortage of appraisers, health concerns, and a need for fast, remote, and accurate appraisals, desktop appraisals were put to the test. Fannie Mae, which has access to millions of appraisal reports, realized through analysis of this massive data set that desktop appraisals could be just as accurate and faster than traditional boots-on-the-ground appraisals—provided the property fit the right profile.
This wasn’t a hasty decision. Based on their extensive data, Fannie Mae determined that desktop appraisals performed well for properties in standardized, data-rich markets, such as suburban subdivisions, where plenty of comparable sales data was available. They found that these appraisals were not only reliable but also offered a faster, more efficient way to process valuations in specific scenarios.
In March 2022, Fannie Mae officially adopted desktop appraisals as part of their standard practices. Fast forward a couple of years and, 44.5% of Fannie Mae loans are issued with appraisal waivers, especially for refinances where risk is lower and data is plentiful. These waivers allow lenders to forgo a traditional appraisal when automated systems confirm that sufficient data exists to support the property’s value.
Fannie Mae’s confidence in desktop appraisals wasn’t built on chance—it was driven by the use of advanced technology and data science. The same tools and methods that helped Fannie Mae identify the reliability of desktop appraisals are exactly what accounts for the accuracy and speed of modern data-driven desktop appraisals.
The Technology and Data Behind Desktop Appraisals
The reliability and efficiency of desktop appraisals are made possible by several key technologies and data sources:
Online Data Sources: Appraisers pull from comprehensive online data sources to complete a desktop appraisal, including:
Tax records: Providing essential property information like ownership history and assessed value.
Plat maps: Outlining property boundaries and dimensions.
Deed restrictions and neighborhood covenants: These can impact a property’s value based on restrictions.
MLS listings: Allowing appraisers to compare recent sales in the area.
Google Maps and other mapping software: Useful for aerial and street-level views of the property and surrounding area.
Zoning maps and GIS systems: Helping appraisers understand land use regulations and restrictions that might affect value.
Digital Photography and Video: Homeowners can submit high-resolution photos and videos showcasing any improvements, renovations, or updates. These media files are geo-tagged and verified through metadata, ensuring that the property’s current condition is accurately reflected.
LIDAR and 3D Imaging: In cases where gross living area measurements or recent property changes need verification, LIDAR technology or apps like CubiCasa can provide accurate 3D scans and floor plans. Typically, tax records and MLS listings suffice for measurements, but when in doubt, this technology allows homeowners to submit precise data to the appraiser.
When Desktop Appraisals Are Ideal
Desktop appraisals shine in specific settings. Here’s when they’re particularly effective:
Tract homes in subdivisions: These homes tend to be similar in size, condition, and design, making it easier to compare them to recent sales data.
New home subdivisions: Newer developments with homogenous properties and consistent conditions are ideal for desktop appraisals.
Master-planned communities: Where lot sizes, home sizes, and property features are highly standardized.
Suburban areas: Properties in suburban neighborhoods with consistent construction quality and condition, where plenty of recent sales data is available.
Active markets: Where there’s an abundance of sales data, larger data sets can provide the insights needed to make useful, reproducible insights.
In homogeneous areas like these, markets tend to be highly active, offering an abundant supply of real estate data, including closed sales, active and pending listings, and withdrawn properties. This variety of listing types creates a treasure trove of data, providing valuable insights that often eliminate the need for an in-person visit.
When a Site Visit is Still Necessary
Although desktop appraisals are reliable for many properties, there are instances where a traditional site visit is still needed:
Homes with expansive views or unique features, such as waterfront properties.
Custom-built homes with distinctive architectural elements or significant renovations.
Rural properties or homes in areas with varied property types, where comparable sales data may be limited.
These properties often have unique characteristics that can’t be fully captured through data alone. In these cases, a physical inspection ensures that all factors influencing value are accounted for.
Not All Desktop Appraisals Are Created Equal
While desktop appraisals offer speed and efficiency, not all of them provide the same level of accuracy. A basic desktop appraisal that doesn't leverage larger data sets and relies on just a few comparable sales from the area, may lack the depth required for a truly precise valuation. This limited approach can overlook critical market factors and nuances, leading to valuations that don’t fully reflect a property’s current value.
In contrast, data science-based desktop appraisals go beyond surface-level data by analyzing larger data sets to draw more meaningful insights. A key technique is price indexing, which adjusts older sales to reflect current market conditions. This allows appraisers to evaluate historic sales through the lens of contemporary market dynamics, preventing outdated comparable data from being applied inaccurately—an even more critical factor in a rapidly changing market.
Price indexing plays a pivotal role by allowing appraisers to use sales data that might otherwise be discarded as outdated. Traditionalists often view older closed sales as irrelevant, but without price indexing, appraisers risk relying on incomplete data. That’s why price indexing is a must-have for every appraisal—its ability to reduce risk and improve precision is undeniable. We’ll explore this technique in more depth in a future post, as its importance truly deserves a closer look.
The Benefits of Data Science-Based Desktop Appraisals
Using data science doesn’t just enhance the accuracy of desktop appraisals—it also introduces a level of transparency the real estate industry has lacked. With data science, appraisers can analyze key market indicators like supply and demand, local trends, and neighborhood dynamics in a way that offers clear, actionable insights. This allows all parties involved including appraisers, homeowners and lenders to better understand the factors driving the valuation.
Through visual aids like charts, graphs, and data visualizations, appraisers can present complex information in a digestible format. This transparency demystifies a historically opaque process, empowering homeowners, real estate professionals and those in the lending space to make more informed decisions.
By using data science, desktop appraisals don’t just become faster—they become smarter, offering more accurate and trustworthy valuations that reduce risk.
The Fear of New Technology—And Why It’s Unfounded
Over time, many technologies we now rely on were met with hesitation. When ATMs first hit the scene in the mid-1980s, people weren’t so sure about trusting machines with their money—what if it vanished into some mysterious void? Similarly, when online banking came along in the mid-90s, concerns about security had people worried their savings might disappear into the internet. Then there were microwaves, which some feared would cause radiation, but now they’re in nearly every kitchen. Even electric cars were once doubted for their practicality, but today they’re a common sight on the roads. Just like these innovations, desktop appraisals faced initial skepticism. But with trusted technology and backing from major players in real estate, they’ve proven their reliability. Desktop appraisals aren’t spooky—they're here to stay, providing a faster, accurate option that’s transforming the industry.
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