Appraisals and ValuationsMortgageRegulatory

Like it or not, desktop appraisals are here to stay

Industry stakeholders take wait and see approach to desktop appraisal option, to start in March

HW+ home appraisal

Desktop appraisals arrived in March of 2020, allowing the housing market to keep humming while many stayed indoors to prevent the spread of COVID-19.

Allowing appraisals without a walk-through was one of several flexibilities the Federal Housing Finance Agency allowed in light of the pandemic. Use of desktop or exterior-only appraisals peaked in April 2020, reaching a share as high as 17% in some places. By the end of 2020, FHFA signaled publicly it was considering hybrid appraisals on a permanent basis, following proposals from both Fannie Mae and Freddie Mac.

In a December 2020 request for information, FHFA highlighted potential benefits of desktop appraisals, including assisting training of new appraiser trainees, and alleviating appraiser shortages in rural and high-volume areas. It also pointed out potential pitfalls of a non-traditional approach.

There were risks, FHFA wrote, because a ”uniform regulatory framework does not exist at both the state and federal levels that holds non-appraisers accountable for their work on appraisals.” A recent federally commissioned report further detailed the appraisal industry’s dysfunctional regulatory regime.

But any risks appear to have been resolved. In October 2021, FHFA Acting Director Sandra Thompson announced to a crowd of mortgage industry professionals that desktop appraisals would become permanent, starting early in 2022. In January, Fannie Mae said it would start accepting desktop appraisals, where an appraiser need not perform a walk-through, for some agency-backed loans after March 19.

The option is limited to purchase transactions, secured by a one-unit principal residence with a loan-to-value ratio of no more than 90%. Loans for second homes, investment properties, cash-out refinances, construction loans, multi-unit properties, renovation loans, condos, co-ops or manufactured homes are not eligible. Any loan application flagged as ineligible by Fannie Mae’s automated underwriting system will have to use a traditional appraisal.

A Fannie Mae spokesperson said that appraisal modernization and digitization, and specifically the launch of desktop appraisals, can offer different career opportunities for a new generation of appraisers. Appraisers could earn more by doing more appraisal reports, the spokesperson said, spend less time and money traveling to appointments, and could more easily work from home, assisted by remote data collection.

The new policy is welcomed by lenders, who often view appraisals as a “pain point” and have sought to reduce turn-times. But there is at least some skepticism of desktop appraisals from appraisers themselves.

D. Scott Murphy, CEO of D.S. Murphy and Associates Real Estate Appraisers and Consultants, raised concerns about bearing the liability for an appraisal, but relying on second-hand information. Desktop appraisals, he said, still hold the appraiser responsible for getting the correct information.

“The only difference is that the appraiser is not required to visit the property,” Murphy said. “That is completely different from doing a traditional desktop appraisal which is done on an abbreviated form with all kinds of exceptions and clauses to protect the appraiser when he has to make certain assumptions.”

Although appraisers can do desktop appraisals from a remote location, they must have accurate floor plan data. Where they get a reliable floor plan sketch is somewhat of a gray area, however. Few listings — only about one in 10, according to Ken Dicks, director of appraisal compliance and initiatives at Reggora — include that data.

The need for accurate floor plan data could indirectly spur the appraisal industry to replenish its dwindling ranks, by giving something for appraiser trainees to do. Trainees could collect the data, and be paid for providing a useful service. Since trainees are not allowed to do appraisals without the supervision of a licensed appraiser, appraisers have little incentive to take them on.

But relying on other sources for the data needed to conduct a desktop appraisal, the listing agent, for example, could be risky. Listing agents have a clear motivation to provide information that might pad an appraisal.

“If the Realtor says there are hardwood floors throughout, and the appraiser puts that in the appraisal report and it’s not the case, that’s a problem,” Dicks said.

Some have also touted he cost benefits that desktop appraisals could bring.

A Fannie Mae spokesperson said desktop appraisals “could help make the appraisal process more efficient in a safe and sound manner and have the potential to reduce costs and time for homebuyers, homeowners, and appraisers.”

Lenders, the spokesperson added, are keen to “understand how to operationalize desktop appraisals because they appreciate the process efficiencies and potential cost savings for borrowers.”

But Sean Pyle, president of appraisal management company Valutrust Solutions, says he’s already dealing with pressure from lenders who are expecting desktop appraisals to reduce their costs, too.

“My counsel to clients I speak with is, ‘Don’t think about this in any other terms than potential time savings,’” Pyle said. “Don’t try to wrap cost savings into this.”

There’s an assumption, he said, that because appraisers could produce an appraisal more quickly, it should be cheaper. But appraisers, not lenders, assume the liability for producing a complete report.

“There’s still some battle scars from 2006 to 2009 where appraisers were made to be the scapegoats,” Pyle said. “But it wasn’t an appraiser deciding to loan 125% of a home’s value for a 3/1 adjustable rate mortgage. The lenders may not like the appraisal process, but they aren’t the ones taking on the risk.”

Appraisers are also likely to balk at another pay cut. In the years after the great recession, appraisal management companies proliferated, which ate into appraisers’ compensation.

Lisa Rice, CEO of the National Fair Housing Alliance, has observed in many sectors of the mortgage industry that cutting costs can also come at the expense of quality. Oversight, in those cases, becomes extremely important.

“Every time you’re paying someone on the ground less, what does that mean about the quality? That lets you know that you really have to be on your p’s and q’s to make sure the quality is there,” said Rice.

For now, however, industry observers are taking a wait-and-see approach with desktop appraisals. Kroll Bond Ratings Agency, in a January 2022 pre-sale report, said they gave a “broad valuation haircut” to all loan pools with appraisal waivers.

Jack Kahan, senior managing director for residential mortgage-backed securities at Kroll, explained they performed the haircut because “there is no third-party value provided to KBRA to substantiate the lender value.”

For loans with desktop appraisals, however, Kahan explained there is no discount, although he said that for loans with desktop appraisals or appraisal waivers, it’s possible that could change “in either direction for either product” as they evaluate performance over time and gather more data.

“For loans with desktop appraisals, since they are performed by licensed appraisers, follow appraiser independence requirements, among other reasons, we generally do not haircut values.”


  1. It’s amazing to me how NOONE has consulted any actual real estate appraisers during all this. This is just another who has the most money to present solutions when the solutions were right there before you. They are called trainees. Yet most lenders won’t allow trainees to do inspections on their own but we will allow anyone else that’s not trained? What is wrong with this world? Let’s create a more lower priced option to make loans off of and more on some of the largest assists people own. Makes real good sense. Lenders only care about closing loans and making money, AMCS only care about making money by taking a portion of the appraisers fee which is why they always find the cheapest and fastest so they can pocket more money. This whole financial world is nothing but greed. Plain and simple.

    As for these desktops and third party inspectors. Here is what I sent my state commission and board. What they do with it is on them however I look forward to the shit hitting the fan when these desktops cause more issues than they were supposed to solve. You know like HVCC AND DODD FRANK. Let’s let all those people looking to make more money make the decisions. Insane.

    My issues with Desktops:

    Third-Party Inspections and the issues

    1) Untrained people are doing home appraisal inspections.

    — there are people like Uber drivers and delta employees doing inspections on homes as a side job.

    —- Where are the protections for consumers to know who might be coming into their homes? Who do they represent? What is the knowledge or experience of these inspectors? Are they remaining unbiased? Are they providing all the info needed? How are they representing themselves to homeowners/borrowers?

    —— These third-party inspectors should be required to be adequately trained. They need to be educated by actual appraisers on how to measure ( ANSI standards now), to look for and know the differences in certain aspects of the property that appraisers look at every day. They need to understand the differences in types of homes, interior and exterior specific data, and external issues.

    —— they need to be licensed by the state or obtain a certification that shows they understand what is expected of them. In addition, they need to show that they can measure, collect accurate data and relay that info properly to an appraiser.

    ——-Background checked. Many of these AMCS require appraisers to be background-checked by them and the state. Third-party inspectors should be held to the same standards as appraisers, and the state should have a proper background check done and a database of these people for any issues or complaints down the road.

    ——- Inspectors should be required to take CE every year and have E&O if they so desire

    _____ One way to improve this is to have State appraisal schools teach these methods Along with on-site training. The other option is to allow Certified Appraisers to do on-site training and then supply the state with a satisfactory completion

    2) Trainees

    —— Trainees or aspiring trainees should be able to take this class, pass it, and then use that experience towards hours regardless of whether they have a mentor or not, so long as they have no issues. Trainees know what’s best and how to do things

    3)Protection for current appraisers
    —-Right now, per my knowledge, there is no law or regulation that I know of that will absolve the signing appraiser of issues due to inadequate information the inspector collected. While many of the forms we use will have certifications that will separate each party, at the end of the day, no laws, regulations, or requirements for the inspectors being responsible for their data could lead to issues and complaints against appraisers. Appraisers should NOT have to take on the responsibility of obtaining lousy information from a third party or trying to figure out if the data is correctly obtained etc.

    —— Third-party data collectors MUST take responsibility for their data given to an appraiser. For example, suppose an appraiser’s report is flawed due to insufficient data. In that case, the appraiser should be allowed to do the job right, and the data collector held accountable for their information. Any Complaint filed must be looked into to determine if the data collector or the appraiser was in the wrong.

    —— As of today, the appraiser is held accountable for everything sent to them. Why? Why is it that I am held responsible for this erroneous information? Sure the appraiser should and will do everything they can to ensure the data is correct; however, they should not be held accountable for someone else’s poor efforts

    4) PROTECT THE CONSUMER (oh yeah y’all forgot about this one. Cause y’all are greedy)
    —- Consumers are not aware of who the person entering the home is knowledgeable, reliable and may mistake them as an appraiser working for the signing appraiser. Consumers can look up the appraiser to check their license, but if not licensed or in a database, these inspectors could present issues to the homeowner and the process of protecting the public trust. Who are these inspectors? Are they an ex-felon? Uber Driver? Wendy’s worker? Dog walker? Consumers deserve to be protected as well as the appraiser. Example: Inspector enters home and assaults the homeowner or steals something. Worst case scenario: Inspectors share data with others, and the house at a later time gets cased and gets robbed? If there is no record of this person or the owner thinks they work for the appraiser, I can ultimately see issues.

    —— Inspectors are not held to USPAP. Meaning they don’t have to abide by ethics rules etc. How can we make them more liable and do the job right? Not share pics online and or keep that data? With no standards in place by the state or USPAP what prevents these people from wrongdoing?

    —- Where do the pictures and data collection information go? Is there a record-keeping rule for these inspectors? Again with no USPAP, licensing, or something to hold them accountable, what prevents them from sharing interior no exterior home pictures, location of cameras, the sketch of the home to others?

    —— Inspectors NEED to be held accountable and take classes such as an ethics class and have some liability with the state if they do wrong

    5) Real estate agents

    Companies are looking to hire agents to obtain data for appraisals
    —- Clear Capital AMC comes to mind

    — Most agents use tax record data and have no idea how to measure a home. How can we ensure Agents are to remain unbiased, measure correctly etc

    _____ Can Agents stay unbiased upon doing peers’ home that’s under contract or on the market? Will they forget things? Will they show deficiencies? How does this affect their licensing?

    ____ Can they lose their realtor license for providing data collection that is inaccurate?


    We have seen a Clear Val report sent to the state of GA and sanctioned. How do we prevent appraisers that reside in other states from doing these without proper knowledge? That case was where an inspector gathered the data, and an appraiser who is licensed in GA but resides in Missouri did the report that caused harm to an investor.

    It’s so sad that the federal government is taking their advice from companies who were supposed to be middle man but now have staff appraisers who get paid by said AMC therefore how can they remain unbiased? Same goes with lenders who own AMCs. I’m sorry but once again the feds, Fannie and Freddie are ready to stick it to the consumer and then cry they need help when crap goes south.

    It’s very clear that everyone thinks the appraiser is an issue within the process when they in fact need to look at the laws and regulations put in place by firstly a corrupt Governor Cuomo, then the feds with Dodd Frank, then all those lenders that apparently can’t do anything wrong and lastly the AMCS that morphed from a. Middle man to now apparently appraisal companies but skirt the laws.

    Do a deep dive and stop pandering to all the BS. How about talking to the real appraisers out there that have made these lenders and AMC millions. Do some research and see just how these new desktops could harm people and not just believe what some third party says.

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