When buying your home, one of the important steps in the mortgage financing process is having an appraisal done. An appraisal is key to determining your loan amount. Later, you may need another and could opt for a less-invasive 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 includes only an exterior inspection, despite the name. While less precise, it can still be fairly accurate and requires more work than it suggests.
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. They are less accurate than in-home appraisals and pose more risk to lenders. During COVID-19, lenders like Fannie Mae, Freddie Mac, and the FHA allowed exceptions to protect homeowners and appraisers. With more data and fewer cases, most lenders have returned to in-home appraisals.
There are several situations when a drive-by appraisal might be acceptable. Lenders sometimes allow this modified version if they originally issued your mortgage. They also commonly use drive-by appraisals for 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 valuation offer homeowners more convenience: valuators stay outside, eliminating the need for interior preparations, schedule adjustments, or allowing a stranger inside. 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.