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What is the difference between a drive-by appraisal and a full 1004?<-- Return to News, Articles and Resources
What is a drive-by appraisal?
A drive-by appraisal utilizes a similar process for estimating market value as the full appraisal with interior inspection. However, the drive-by appraiser must rely on outside sources for their information. For example, the appraiser may check court records or a multiple listing service record to obtain the age, size, and other characteristics of your home. Although these records may not always be accurate, they provide some basic information to complete the appraisal.
Additional features include: Location map, Floor sketch, Color photos of subject and comparables, and Statement of Living Conditions.
What is a Full Appraisal?
Also known as the Uniform Residential Appraisal Report (URAR), the 1004 is designed for the valuation of one-unit residential properties. Valuation is based on an interior and exterior inspection of subject property and exterior inspection of all comparable sales by a licensed appraiser. Available for use in Construction Lending, for FHA, Manufactured Home and Jumbo loans as well as REO valuations.
Additional features include: Map of subject versus comparable properties, Building Sketch with exterior dimensions, Front Rear and Street photos of subject, and Front picture of all comparables.
Will You Overpay For Your Appraisal?
by David Reed, a veteran Mortgage Banker, successful Real Estate Consultant and author.
Published: January 4, 2002 Website: www.realtytimes.com
Technology has pretty much caught up with everything. Almost all around us seems to be automated in some way, working faster and smoother than before. America's productivity gains are no secret and it's due in large measure to increases in computing power.
Not surprisingly, automation has begun to impact the appraisal process. Recent guideline changes allow lenders to consider several appraisal options for your home purchase or refinance.
At the top of the list, a full appraisal with pictures, comparable sales and measurements is commonly called a "1004" because of the form number Fannie Mae assigns to such a report. A faster and cheaper way of doing an appraisal is sometimes called a "drive by," where the appraiser will verify recent home sales in the area to justify the new home's value, "drive by" the home to assure it's there, and -- from the outside at least -- have reason to suggest that the property is good collateral for a loan.
Another choice is the "Minimum Value Assessment." The MVA verifies the existence of the structure through previous recordings and again justifies value using recent home sales in the neighborhood. This last method relies almost exclusively on electronic data about home sales in the area -- there are no pictures, no measurements, and no adjustments.
Each form of appraisal has a different cost. Less work for the appraiser means less money the consumer has to pay for property valuation. Which report do you need? Typically it's an underwriting decision that determines what's required, and these decisions are usually made by an Automated Underwriting System, a software program that decides if the borrower is qualified to buy the home and what documentation is required to close the loan. If your approval only requires a Minimum Value Assessment then you shouldn't have to pay for a full appraisal.
Relatively few loans today are approved requiring only the drive-by method, and still fewer use the minimum standards. Sometimes the use of less than a full appraisal can mean more than $100 in loan savings. As technology improves and data becomes more reliable, the traditional appraisal as we know it may largely vanish.
Some buyers still want a full appraisal -- regardless of the loan requirements -- to assure that a home really has a certain level of value. A sale agreement, for instance, might require a home to appraise at a certain value -- less and the deal is off or must be re-negotiated.
At your application, your loan officer may have asked that you pay for your appraisal in advance, so you hand over $300 or so for the appraisal. But what if your approval only requires a "drive by" appraisal that costs $150?
You have a choice at this stage: You can accept the drive-by appraisal or ask that a full appraisal be performed. If you ask for a full appraisal then you'll pay the full $300 fee -- but if you only want the drive-by appraisal that costs $150 then you should expect a refund for any excess appraisal charge.
Lenders and mortgage brokers are forbidden to "up charge" for third-party services. In other words, if the appraisal only costs $150 but the lender collected $300, they can't keep the change. They have to give it back.
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