When you buy a home, you must be very patient for a series of processes, right from the home appraisal to the property inspection and tiring loan approval procedure; everything takes time. However, the most important thing for your mortgage approval is the home appraisal. Many people have no idea about it.
A home appraisal is a process through which the market value of a property is determined. A professional appraiser evaluates the property according to industry standards. Based on the property value, the lending agency decides if you are eligible for the loan or not. A home appraisal is divided into three categories, full appraisal, desktop appraisal and drive-by appraisal.
A drive-by appraisal is considered the best option in most cases. Here we are discussing everything you should know about the drive-by appraisal. It will help you to make your decision.
What is Drive-by Appraisal?
This is the type of property appraisal when an appraiser evaluates your property by analyzing the exterior. They don't enter the house, in contrast to the full appraisal. Full appraisal is based on the interior and exterior evaluation. A drive-by appraisal is the best option for these days; people are not allowed to enter homes because of social distancing restrictions.
How does It work?
The professional appraiser drives – by the property and evaluates its value. They considers the property's location, the area it covers and the external condition. The scale of evaluation is the market standards. Appraisers research similar properties and analyze them for competitive assessment. They interview the owner for comparative analysis. It helps the appraiser get an idea about the house's interior.
Once they have satisfactory information about the interior, they visit the property to evaluate the exterior. This visit helps them assess based on location, amenities available in surrounding and nearby properties. They also consider the outlook of the community in future. Once they are done with the internal comparative research and external evaluation, the next step is assessment according to market standards.
Advantages of Drive-by appraisal
A drive-by appraisal is based on the valuation of the property's exterior according to market standards. To understand it completely, you must know the advantages of this type of appraisal. Here we are discussing a few of them.
Less interfering: In drive-by appraisal, the appraiser is not allowed to enter your home, so there is very less interference with your personal space. They don't have to enter the home, so they can evaluate your property even when you are away. Even if you are at home, there will be no inconvenience for you.
A cheap option: Full property evaluation is very expensive, and drive-by appraisal is comparatively cheap. The price of the conventional appraisal can be around $500, but drive-by appraisal cost you between $100 to $150.
Less hectic: In the case of conventional appraisal, the homeowner has to clean the house inside out, as appraisers evaluate the interior and exterior of the house. A drive-by appraisal is about evaluating the exterior only, so there is no need to clean the interior, which is less stressful for the homeowner. This type of appraisal is less hectic for the appraiser; they can evaluate the property without leaving his car.
Disadvantages of Drive-by appraisal
A drive-by appraisal is indeed less hectic, cost-effective, and less interfering, but this appraisal has some disadvantages. Here are some of the cons of drive-by appraisal.
Inaccurate results: A drive-by appraisal is based on the exterior evaluation of the property and comparative study of similar properties and information provided by the homeowner. Homeowners may not provide accurate information. For instance, there can be damages inside the house, and if they are not visible, the owner may not be aware of them. So, the owner's information is inaccurate, and the outcome of such inaccurate data cannot be correct.
Invalid data: A drive-by appraisal is based on comparative analysis of similar properties, so there are chances that you will get invalid data. Most of the property websites do not update their data regularly. Moreover, evaluation is done based on the exterior, while the interior can differ. No two properties can be the same in every respect, so that the invalid data can lead to inaccurate results. There are chances that such appraisal will be overvaluation or undervaluation of property.
High risk: drive-by appraisal can be a risky option. When the appraiser doesn't know about the interior issues and problems, they will not do an accurate evaluation. When the appraiser cannot see the internal cracks, mould growth, and structural issues, based on the house's exterior, they report that everything is great; it's very risky.
When should you choose drive-by appraisal?
It is important to understand that drive-by appraisal is not for every situation. Here are a few points that will help you understand when you can take advantage of this type of appraisal.
Property equity: lending companies ask for a drive-by appraisal when you have equity in your property. Property lenders want to evaluate the level of risk involved if they approve your loan. To ensure that you can return their loan, they can ask you to go for a drive-by appraisal. It will give the lenders an idea about the property's future; if they is satisfied with the results, they can approve your mortgage.
The threat for foreclosure: if the property is under the threat of foreclosure, the lending agency may ask you to do a drive-by appraisal. The lender wants to evaluate whether, in case of a foreclosure, the property will pay back his loan or not.
Drive-by appraisal has both advantages and disadvantages. Suppose the exterior of the home is great. In that case, a homeowner can use it to his advantage, and the appraiser will over evaluate the property based on the exterior. Still, if the exterior is in bad condition, you should not go for a drive-by appraisal. It will negatively affect the value of your property, and your mortgage or loan application can be rejected.