Full professional appraisal benefits and limitations
A full appraisal is the best way to get a trustworthy, accurate valuation for your home. Where the AVM approach relies fully on data and science, the appraisal approach leverages both science and art. Bates explains, “There are no two homes that are exactly alike, so you need a professional with experience to know which adjustments to make.”
A full, professional appraisal will always be performed by a trained, licensed appraiser. Typically, a homebuyer will pay for the appraisal, required by the lender, as part of the purchase process. Each state has a vigorous process for appraisers to receive initial and ongoing training specific to the real estate market and laws of the state. They are trained to use multiple qualitative and quantitative data points to determine a fair, accurate value.
There are a few different methods that appraisers use to value a home. Most of the time, the appraiser will use the sales comparison method to find comparable homes that have recently sold and estimate the value based on similarities and differences between the comparables. Sometimes, for new homes or homes that have few comparables, the appraiser will use the cost approach to estimate what it would cost to rebuild the home from scratch. The final method is the income approach, which is mostly used for investment properties to determine the home’s ability to generate an income.
Here are the major factors appraisers use when performing a full appraisal:
- The property characteristics, such as property and home size, bedrooms, etc.
- The general condition of the home and its structure
- Any improvements and upgrades that affect the value
- The home’s location and neighborhood
- Special considerations, such as accessory dwelling units or energy efficiency
Alternative valuation approach: hybrid and desktop appraisal
During the early stages of the COVID-19 pandemic, on-site appraisals were considered a safety hazard. In order for home sales and transactions to continue with confidence, alternative appraisal methods appeared that minimized the need to be on-site for the appraisal.
Desktop appraisals are similar to full appraisals in every way except that the appraiser doesn’t physically visit and inspect the property. The appraiser will still use proprietary data from the market and comparables, including pictures, videos, and any other information about the subject property, to determine the home’s value. Desktop appraisals are quite a bit less expensive than traditional appraisals, but they can also miss any unique home characteristics that could affect the overall value.
The hybrid appraisal is a combination of the desktop and full appraisal approach (hence the term “hybrid”). In this approach, the hired appraiser does not conduct a property inspection but hires a third party to conduct the inspection and provide detailed notes. The appraiser then uses these notes, along with the other market and sales comparison data, to determine the home’s valuation.
The benefit of this approach is the speed of the appraisal report. Inspectors require far less training, so getting the inspection report is much faster than if the appraiser did it personally. Again, the sacrifice, in this case, is how well the appraiser can account for the property’s condition and unique characteristics without seeing them in person.
How can I find and use a free AVM estimate?
There are many free consumer-focused AVMs or home value estimators (HVE) available online. A simple Google search will reveal dozens of options from reputable providers. Because there are so many fast, free options, we advise you to try multiple tools in order to best triangulate your ballpark estimate.
Each provider incorporates its own algorithm and proprietary data into its model, so your particular property may get a higher valuation from one provider over another. Because none of the AVMs are very transparent about how their model works, or which exact data points they are using, you will have to do a bit of trial and error.
