Types of Mortgage Appraisals and Property Valuations

Not every mortgage transaction requires the same type of property valuation. Depending on the loan program, the transaction, the property, the property data available, the automated underwriting findings and the applicable lender, agency and investor requirements, a borrower may encounter several different appraisal or valuation methods. Borrowers generally do not simply pick the method that gets used.

This guide walks through the valuation types you are most likely to see, the practical tradeoffs of each, and why an appraisal is never a substitute for a home inspection.

1. Traditional full appraisal

In a traditional full appraisal, a licensed or certified appraiser typically inspects the interior and exterior of the property, gathers comparable sales and other market data, and develops an independent opinion of value in a written report. It is the most comprehensive physical review among the common valuation options and is widely used across mortgage programs.

Potential advantages

• More direct observation of the property by the appraiser
• An independent professional opinion of value
• Interior and exterior condition can be considered
• Widely accepted across mortgage programs and transaction types

Potential considerations

• Usually costs more than less intensive valuation methods
• Can take longer to schedule and complete
• Observed conditions may lead to repair requirements depending on the loan program and circumstances

2. Hybrid appraisal

A hybrid appraisal separates the property visit from the valuation. Property information and photos may be collected by a trained third party, and the appraiser then uses that property data along with market data to develop the opinion of value without personally visiting the home.

Potential advantages

• Can be faster than a traditional appraisal
• Can reduce scheduling constraints
• Still provides physical property information to the appraiser

Potential considerations

• The appraiser may not personally visit the property
• The valuation relies partly on property information collected by another party
• Availability and eligibility depend on the transaction and applicable guidelines

3. Desktop appraisal

In a desktop appraisal, the appraiser develops an opinion of value from available property and market data without performing a traditional onsite inspection. Public records, prior listing data, tax records, MLS information and other sources may be used to describe the subject property.

Potential advantages

• Potentially faster turnaround
• Less scheduling inconvenience for the occupant
• May cost less than a traditional full appraisal

Potential considerations

• No traditional physical inspection by the appraiser
• Greater reliance on the accuracy of available property data
• Not every mortgage transaction is eligible

4. Exterior only appraisal

An exterior only appraisal, sometimes called a drive by, means the appraiser evaluates the property without completing a traditional interior inspection. Eligibility is limited and depends on the applicable mortgage program, investor requirements and the specific transaction, so it is not something that is available on every purchase or refinance.

Potential advantages

• Less intrusive for the occupant
• May be faster than a full interior inspection
• Interior access may not be required

Potential considerations

• Interior condition and improvements may not be directly observed
• Limited eligibility depending on program and transaction

5. Property data collection and property data reports

A property data collection is not the same thing as an appraisal. Someone visits the property to collect and document physical characteristics, measurements and photos, and reports that information without providing a final opinion of value. The person collecting the data is not necessarily the appraiser, and in some workflows there is no appraiser opinion of value at all, while in others the data supports a hybrid valuation.

Potential advantages

• Interior and exterior property characteristics can be documented
• May reduce scheduling dependence on an appraiser physically visiting the property
• Can support other valuation methods

Potential considerations

• A property data collection is not necessarily an appraisal
• The data collector does not necessarily provide an opinion of value
• The ultimate valuation process depends on the applicable program and lender requirements

6. Appraisal waiver

An appraisal waiver means an eligible transaction may proceed without a traditional appraisal. Eligibility is generally determined through automated underwriting using available property data, loan characteristics, transaction characteristics and applicable agency or investor requirements. It is an offer produced by the system, not a decision a loan officer makes.

Potential advantages

• No traditional appraisal may be required
• Potentially eliminates the appraisal fee
• Can reduce appraisal related scheduling time
• May help streamline the mortgage process

Potential considerations

• Not every borrower, property or transaction qualifies
• A waiver cannot be manually selected or guaranteed by your loan officer
• A waiver does not mean the property's condition has been physically inspected
• A waiver is not a guarantee of the property's market value

Appraisal vs home inspection: they are not the same thing

A mortgage appraisal exists primarily for valuation and lending purposes. It supports the lender's collateral decision and, on some programs, checks minimum property standards. A home inspection serves a different purpose: it gives the buyer a far more detailed evaluation of the physical condition of the home, its systems and its likely repair needs.

Receiving an appraisal waiver does not mean you should waive a home inspection. The two decisions are unrelated, and an inspection is for your protection, not the lender's.

Comparison table

Costs and timelines vary by market, property and vendor availability, so treat the columns above as relative comparisons rather than quoted amounts or promised turn times.

Who decides which appraisal I get?

The valuation method is determined by the requirements that apply to your specific file, not by borrower preference. Factors that commonly influence it include:

• Loan program, such as conventional, FHA, VA or USDA
• Automated underwriting findings
• Property characteristics, including type, condition and location
• Transaction type, such as purchase, rate and term refinance or cash out
• Available property data and its reliability
• Loan to value and loan amount
• Agency or investor eligibility requirements
• Lender requirements and overlays
• Other applicable underwriting factors

Because of that, you should not assume you can simply select the least expensive valuation option, and the method can change if the file changes.

The buyer's perspective on the tradeoff

Less intensive valuation methods can reduce cost, scheduling friction and time to closing. In exchange, they generally provide less independent physical observation of the property. If your loan ends up with a desktop appraisal or a waiver, nothing about that tells you the roof is sound, the furnace works or the basement stays dry. A mortgage valuation should never be confused with a comprehensive home inspection.

If the value that comes back is lower than the contract price, that is a separate situation with its own playbook, covered in the guide on what happens if the appraisal comes in low.

Have a question about the valuation on your file?

Not sure why a particular appraisal or property valuation was required for your mortgage? I can help explain what was ordered, how it fits into the mortgage process, and what to expect next.

Educational purposes only. Appraisal and property valuation requirements vary by loan program, property, transaction, lender, agency, investor and automated underwriting findings. Availability of a particular valuation method or appraisal waiver is not guaranteed. An appraisal is not the same as a home inspection. Information is for educational purposes only and is not a commitment to lend. Manny Oloyede | Mortgage Broker | NMLS 1824463 | Ultimate Mortgage Brokers LLC. Equal Housing Opportunity.