The appraisals done for home sales are increasingly done remotely rather than in person.

The appraisals done for home sales are increasingly done remotely rather than in person. / Bloomberg via Getty Images

When someone is looking to buy a home, a mortgage lender will ask a simple question. What is the house worth? This is where appraisers step in to independently determine the property's value.

From the start of the pandemic, though, appraisers have been putting price tags on houses without ever setting foot on the property. Originally a temporary emergency measure, it appears that remote appraisals are now here to stay.

In March 2020, the Federal Housing Authority gave permission for optional "desktop appraisals" as a response to the health risks of COVID-19. Home appraisers could opt out of an in-person inspection if enough online data was available on the property. Mortgage giants Fannie Mae and Freddie Mac accepted them on a temporary basis. And they have become more common ever since.

While some questioned whether remote appraisals could be accurate, they kept deals on track at a time of wariness over in-person interactions.

"They [Fannie and Freddie] understood they needed to keep the flow of money going and without the appraisal, [it] was going to stop the mortgages," said Sandra K. Adomatis, vice president of the Appraisal Institute.

Last month, Fannie and Freddie began accepting desktop appraisals nationwide for all eligible transactions.

The real estate industry is confident in remote appraisals

In a traditional appraisal, a mortgage lender hires a state-licensed appraiser to perform an in-person inspection detailing the home's exterior and interior conditions, with documentation in photographs, along with a floor plan that determines the property's living space.

Some properties fit a cookie-cutter mold; others are more unique, especially in rural areas or urban cities that have historical relevance.

But the industry is confident today's technology is more than sufficient.

"I think, with the databases that they have available, that get built, have improved their overall visibility into the market, I think can mitigate some of that risk," said Pete Mills, senior vice president for residential policy and engagement at the Mortgage Bankers Association.

While it might seem like a better idea to have a real person go to a house to determine its value rather than using data, some experts say traditional in-person appraisals are often flawed.

During the 2008 housing crisis, appraisers were pressured into putting a price tag on a home that was favorable to the lender, often leading to valuing homes at a much higher cost than they were worth.

"You do want independence. You don't want somebody with a horse in the race controlling the appraiser and the appraisal system. " said Mike Calhoun, president of the Center for Responsible Lending.

Technology could help address a looming shortage of appraisers

Another reason why more homes are likely to be appraised remotely: a shortage of appraisers available to go out in the field.

"It is an aging population of appraisers. So, there is an imbalance between need and the number of appraisers able to serve the market," said Mills.

Desktop appraisals are still conducted by state-licensed appraisers. Because they are quicker to process than in-person visits, the remote option may address the labor crunch.

Still, given that desktop appraisals are in their infancy, it's too early to tell how they will affect the real estate industry. "It's not clear where this will come out and where it will end," Calhoun said.

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