When buying your home, one of the important steps in the mortgage financing process is having an appraisal done. Having an appraiser determine the value of the property is essential to determining how much your lender is willing to lend you for the purchase. However, there could be times down the road when you may need another home appraisal and you might be able to get a less-invasive option: a drive-by appraisal.
Traditional Vs. Drive-By
A traditional appraisal involves a professional coming to your home, inspecting both the exterior and interior, using the observed conditions and the surrounding neighborhood characteristics to determine the market value of your property.
A drive-by appraisal, while it does not literally mean the appraiser simply drives by your house, it does include only an exterior inspection. Although this may not produce quite as accurate of a valuation, it can still come close, and it involves a lot more work on the appraiser’s part than the name implies.
In addition to walking around the property’s exterior, taking photographs and detailed notes, the appraiser will find “comps” (recently sold homes in the vicinity) and visually inspect them as well to compare your property against them. The features and condition of the general neighborhood will also be taken into consideration.
The appraiser will also research as much data as possible, including information like tax records, public records about the house, and MLS listings to get the most correct picture of the home’s worth.
When Is a Drive-By Appraisal an Option?
Typically, mortgage lenders do not allow drive-by appraisals for home purchases. This is because they are less accurate than an appraisal that includes the inside of the home and presents more risk for the lenders. However due to the COVID-19 pandemic, many lenders, including Fannie Mae, Freddie Mac and the FHA, made exceptions for them to protect both the homeowners and the appraisers from the risks of coronavirus. With the number of cases and more information on the disease available today, many lenders have gone back to in-home appraisals for the most part.
There are several situations when a drive-by appraisal might be acceptable. Lenders will sometimes allow this modified version if you are refinancing a mortgage that was originally made through them. Drive-bys are also very common methods employed with home equity loans and home equity lines of credit. Additionally, if you are at risk of foreclosure, your lender might order a drive-by to assess how much your home would sell for if you don’t get current on your mortgage.
What Are the Advantages?
Drive-by appraisals are more convenient for homeowners: no stranger is entering the home, the inside does not need to be prepped, and no schedules need to be rearranged for it to happen. They are usually cheaper than traditional appraisals as well because less physical inspection in required of the appraiser.
While a drive-by appraisal is not the best choice in every situation, it may fit your needs.