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If you didn’t work in this industry, you might guess a desktop appraisal was an opinion of value on a piece of furniture—or perhaps on a computer.
As I hope you are aware, however, a “desktop,” as it’s often abbreviated in the industry, refers to a residential appraiser’s scope of work for a specific appraisal assignment. Scope of work is “the type and extent of research and analysis in an appraisal or appraisal review assignment,” according to The Appraisal Foundation’s “2020–2021 Uniform Standards of Professional Appraisal Practice.” In other words, what is the lender or appraisal management company asking the appraiser to do? This is information appraisers need to know before they accept an assignment. Are they required to fully observe the interior and exterior of the property, drive by the property and view the property from the exterior, or never leave the office? Each of these options is an appraisal.
Predictably, the scope of work for desktop appraisals is limited. Appraisers don’t inspect the interior or exterior of the property. All the work is conducted at their desk, hence the term, desktop.
Scope of work is defined in the forms appraisers use for mortgage financing. The Uniform Residential Appraisal Form (Fannie Mae form 1004 or Freddie Mac form 70) states that the appraiser must, at a minimum, perform a complete visual inspection of the interior and exterior areas of the subject property, inspect the neighborhood and inspect each comparable sale from at least the street. For a desktop assignment, appraisers use the Fannie Mae 1004 Desktop or the Freddie Mac 70D form. Those forms state that the appraiser must, at a minimum, “obtain and review adequate and reliable information for the subject property including, but not limited to, public and/or private data records, and information as described by the appraiser in the appraisal report.” In a desktop, in other words, rather than physically observing the property, the appraiser must find credible data. If the data isn’t credible, neither is the appraisal.
Appraisers obtain their data from a range of sources, such as prior appraisal reports, MLS photos and listing sheets; municipal agencies, including assessors, municipal building and zoning departments, listing agents, the internet and homeowners.
Appraisers have to evaluate third-party data with a skeptic’s eye. Homeowners have a vested interest in their home’s value, are not quick to point out the flaws, defects, and problems; and typically do all that is possible to get the highest value for their property. Brokers and agents, municipal agencies, assessors and tax appraisers are accountable to others, such as their clients, constituents, organizations and communities. Appraisers are accountable to their clients, who are typically the lender or the lender’s agent (the appraisal management company), as well as the state licensing agency where they are practicing and the oversight by the federal government. Because data may be prone to error for any number of reasons, appraisers verify their data through two or more sources.
Correct data is a big deal. When appraisers develop an opinion of value based on unreliable data, they can get in big trouble, including losing their appraisal license.
I am fortunate to live and work in a disclosure state, where the date of sale and the purchase price of a property is recorded, making it part of the public record. For the appraisers in nondisclosure states, obtaining data is more difficult. In nondisclosure states, the Recorder of Deeds information, like the final sale price, is not publicly available. Obtaining sales information from the county office or public record, including the sale date or sale price, is prohibited to the public. Public officials cannot force anyone to disclose the sale price. It’s a real problem for appraisers in nondisclosure states, who must rely on the cooperation of brokers, agents and auctioneers. Private sales are difficult to verify and obtain full information about the sale.
How can agents help?
- Create an accurate listing sheet.
- Leave interior photos of listings in the MLS post-closing.
- Respond to phone calls and emails from appraisers.
- Share your knowledge.
Article 11 of the REALTOR® Code of Ethics states that REALTORS® are obligated to provide their clients with competent services within the scope of their licensing. One of those ways is providing a listing sheet with accurate content. In the National Association of REALTORS®’ Handbook on Multiple Listing Policy (page 6), “listing content” includes, but is not limited to, photographs, images, graphics, audio and video recordings, virtual tours, drawings, descriptions, remarks, narratives, pricing information and other details or information related to listed property. Mistakes happen, especially if a broker or agent is cloning from one listing sheet to create a new listing sheet. That’s why there are MLS policies in place to clarify how listing agents can correct an error and how those using listing sheets can report mistakes.
As it says in the preamble of the National Association of REALTORS® Code of Ethics, “…cooperation with other real estate professionals promotes the best interests of those who utilize their services.” An appraisal report is only as good as the data available for analysis. So, when developing desktop appraisals, the appraisal community needs your cooperation; it’s vital for credible assignment results.
