Everything You Need To Know About Hybrid Appraisals
Molly Grace4-minute read
May 11, 2021
If you’re buying a house, selling a house or both, an appraisal is likely in your future. Buyers – and their lenders – want to know that a home is being sold at its fair market value. An appraisal helps determine what that is. Appraisals are also part of the refinance and loan assessment processes.
Although only used in some cases, hybrid appraisals – also known as bifurcated appraisals – provide a way to expedite the process while making better use of an appraiser’s skillset.
Hybrid appraisals have historically been used for mortgage servicing, rather than home purchases. But as the real estate industry looks to modernize the appraisal process and make it simpler and more streamlined – a change that has been sped up by COVID-19, which has created a need for flexible appraisal solutions – hybrid and other nontraditional types of appraisals will likely continue to grow in popularity and become a more common resource for lenders, homeowners and home buyers.
Here are all your questions about hybrid appraisals, answered.
What Are Hybrid Appraisals?
A hybrid appraisal is a lot like a traditional appraisal. But instead of the appraiser doing both the inspection of the home and the appraisal report, the process is split into two parts that are each completed by a different person. Hence the name “bifurcated.”
When a hybrid appraisal is used for a property valuation, a third party will visit the property and complete the physical inspection of the home, noting its condition, features, size, location and any other factors that are relevant to the property’s value.
This property data collector will look at both the inside and outside of the home, and they’ll collect the same type of data that’s used to complete a traditional appraisal. The difference with a hybrid appraisal is that the person who visits the home – who may be a property inspector, real estate agent, appraiser trainee or even another licensed appraiser – will turn over the data they collect to the appraiser, who will complete the valuation on the property.
The appraiser will then complete their part of the process using the data collected by the third party, as well as public records, their local multiple listing service (MLS) and other sources to complete the appraisal report. They’ll choose comparable sales, or comps, to help determine the fair market value of the property they’re appraising.
This process allows the appraiser to focus on the valuation, which is where their expertise and experience lies.
How Is A Hybrid Appraisal Different From A Desktop Appraisal?
Both hybrid and desktop appraisals have utilized technology to make the appraisal process faster and more efficient.
Desktop appraisals are typically done completely remotely, meaning that no physical, in-person inspection of the property has been done. Appraisers completing this type of valuation will use all available data on a property to formulate their opinion of value.
Using public records and MLS data, for example, an appraiser can learn about the age of a home, its square footage, the number of bedrooms and bathrooms and other relevant data points. Then, they can look at recently sold homes in the neighborhood with these same characteristics (also known as comps) to help them form an opinion of the property’s value.
What’s A Bifurcated Appraisal?
As we’ve already mentioned, a bifurcated appraisal is just another name for a hybrid appraisal. It’s another way of saying that the appraisal process is split up into two parts, with both parts completed by a different person.
Remember that with a bifurcated (hybrid) appraisal, a third party will complete the in-person inspection of the subject property. Then, they will report their findings to the appraiser, who will gather data from public records, the MLS and other sources to complete the appraisal and report their opinion of the property’s value.
What Data Is Collected During A Hybrid Appraisal?
The person completing the in-person inspection of the home will look at the home’s interior and exterior and document all of its characteristics and features. They’ll make a note of everything from the home’s design style to the age and condition of its heating and cooling systems.
Then, in addition to the information provided by this third-party inspector, the appraiser will do their own research, using both market-level and property-specific data to complete their valuation of the home.
Where exactly does this data come from? An appraiser may use data from a property inspection, plans and specifications, public records, engineering reports and photos of the property, according to the Appraisal Foundation, which sets the standards for real estate valuations via the Uniform Standards of Professional Appraisal Practice (USPAP).
It’s important to note that even though the process is different from a traditional appraisal, hybrid appraisals are held to the same standards as traditional appraisals, and an appraiser completing a hybrid valuation needs to base their opinion of a property’s value on the same facts and data that would be used in a traditional appraisal.
What Are Hybrid Appraisals Used For?
In the past, hybrid appraisals have been more commonly used for servicing purposes, not for purchasing and refinancing. But that may be changing as consumers, lenders and investors look to make the appraisal process more efficient.
Some common reasons a lender might utilize a hybrid appraisal include updating a loan value, assessing how a loan is performing or in the case of preforeclosure or foreclosure.
There’s been more of a push in recent years to move towards more flexible appraisal options, including hybrid appraisals, for home purchases and refinances. With COVID-19, for example, the Federal Housing Finance Agency (FHFA), which oversees major mortgage investors Fannie Mae and Freddie Mac, has temporarily allowed for nontraditional, low-contact solutions, including desktop appraisals and exterior-only appraisals, which enable appraisers to complete valuations without risk of exposure to others.
Why Are Hybrid Appraisals Popular?
Hybrid appraisals are becoming increasingly popular because they’re faster, more efficient and better utilize an appraiser’s expertise.
Hybrid appraisals benefit appraisers by limiting their scope of work and making better use of their skill sets. Instead of having them drive out to take measurements and photos, appraisers can stay at their desks and focus on the higher-level work of analyzing the property and performing the valuation.
Are There Fees For A Hybrid Appraisal?
These types of appraisals are often touted as being significantly cheaper than a traditional appraisal. However, while hybrid appraisals can be more affordable than traditional appraisals, they aren’t always, especially in today’s fast-moving markets where demand is high.
According to HomeAdvisor.com, the cost of an appraisal can range between $312 – $407, though this can vary depending on your home and where you live. City dwellers or those in remote locations, for example, can typically expect to pay more than this.
Should I Get A Hybrid Appraisal?
In general, consumers won’t get to choose what type of appraisal they get. If you’re purchasing a home using a mortgage, your lender will be the one to order the appraisal.
The type of appraisal that will be ordered will depend on the circumstances of the transaction, the lender’s own rules regarding what types of appraisals they consider acceptable as well as the rules of the investors they sell their loans to.
What’s important for home buyers, homeowners and home sellers to understand is that hybrid appraisals rely on the same information that traditional appraisals do, and the professionals involved in valuating the property you’re buying, selling or refinancing must ensure that they’re in compliance with the appraisal standards set forth by USPAP, regardless of the type of appraisal they’re doing.
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