Hybrid appraisals have become more prevalent and accepted by the lending industry as an alternative to traditional appraisals. Benefits to lenders and consumers include quicker turn times and reduced cost. So, what exactly are hybrid appraisals and why are they an excellent alternative to traditional appraisals?
What are hybrid appraisals?
Hybrid appraisals were developed as an alternative valuation solution in response to the increasing turn times and rising costs of traditional appraisals, especially during peak lending season. Hybrid appraisals are being used more frequently as an alternative especially for HELOCs, non-traditional lending (non-GSE), REO/default, and portfolio management. They are most effective in urban and suburban markets where both the general market and specific subject data are readily available. However, they are increasingly available in more rural markets.
Let’s look at the most important similarities between hybrid and traditional appraisals. First, both are completed by licensed or certified appraisers who are geographically competent in the subject’s market. It is the experience and expertise of the appraiser that brings credibility to the appraisal report regardless of the form type. Another essential similarity between hybrid and traditional appraisals is that both are completed using a USPAP compliant appraisal process and form.
A hybrid appraisal is completed on a shorter form, emulating the desktop appraisal report that has been around for years. There are multiple hybrid appraisal product offerings with varying amounts of content. Some versions require an exterior-only inspection, while others include both an exterior or interior inspection, photos, and measurements. Hybrids also contain varying levels of information from third-party inspection reports, location maps, and graphs or charts containing pertinent market data. Some of the more detailed hybrid appraisal products include analysis of active listings or comparison grids detailing comparable sale and market adjustments.
How do hybrid appraisals achieve their efficiencies?
Hybrid appraisals achieve time-saving efficiencies by utilizing third-party inspections completed by home inspectors, real estate agents or other appraisers. These real estate professionals transmit the data collected in the field directly to the appraiser. No longer must the appraiser completing the assignment dedicate time to schedule and complete an inspection, allowing the appraiser to focus solely on the analysis of the provided data and the development of the appraisal report. Using dedicated third-party inspectors eliminates one of the biggest causes for extended turn times during peak lending season - the lack of the appraiser’s availability to schedule inspections. Depending on the appraiser’s workload, inspections are often pushed out a week or two and beyond.
The use of third-party inspections also translates to a reduction in the cost of an appraisal product. By utilizing an inspector, the appraisal process is shortened for the appraiser by eliminating the time spent communicating to schedule, driving to the inspection, measuring, and taking all the required photos. By determining the appraiser’s fee at an hourly rate, the fee for hybrid appraisals is often substantially less than the average fee for a traditional appraisal. Hybrid appraisals are becoming more attractive to appraisers who want to reduce or cut out field work since they may complete more assignments in less time.
While hybrids may never fully replace traditional appraisals, especially for complex assignments or in rural markets where online data might be limited, they have certainly become a viable alternative. Faster turn times, reduced cost, and USPAP compliance are all reasons that many lenders have begun to utilize hybrids over AVMs, evaluations, BPOs, and standard appraisals for a large range of their lending decisions. Currently, there are numerous providers of hybrid appraisal products available to lenders to meet their valuation needs.