Drive-By Appraisal

What is a Drive-By Appraisal?

A drive-by appraisal, also known as an exterior-only appraisal, is a method professionals use to estimate the value of a property. Unlike the traditional full appraisal, this assessment involves evaluating the property’s value based solely on an external inspection from the street or the property’s perimeter. This approach means the appraiser does not enter the property, relying instead on visual cues from the exterior, public records, and information provided by the owner or real estate agents.

Examples of Drive-By Appraisal

Divorce Proceedings: In cases where one party denies access to the appraiser, such as a contentious divorce, a drive-by appraisal might be necessary. The appraiser will make value assumptions based on visible exterior conditions.
Foreclosure: Lenders might use a drive-by appraisal for a property in foreclosure to minimize costs. Since access to the interior could be problematic, an exterior-only review remains practical.
Remote Properties: When properties are in remote or secure locations where accessing the interior is difficult or impractical, a drive-by appraisal provides a reasonable estimate based on what’s visible from the outside.

Frequently Asked Questions (FAQ)

What is the main disadvantage of a drive-by appraisal?

The primary disadvantage is the potential inaccuracy due to the inability to inspect the property’s interior. The appraiser must make assumptions about internal conditions that may not be accurate.

Is a drive-by appraisal cheaper than a full appraisal?

Yes, a drive-by appraisal typically costs less because it requires less time and effort compared to a full appraisal with interior inspection.

Can a drive-by appraisal affect a mortgage approval process?

Lenders may accept a drive-by appraisal in specific situations, but in most cases, a full appraisal is preferred for mortgage approvals to ensure a comprehensive valuation.

How reliable are drive-by appraisals?

The reliability can vary. While they are useful in certain contexts, they come with higher uncertainty compared to full appraisals due to the lack of interior inspection, potentially leading to inaccuracies in condition assumptions and value estimation.

Are there specific standards for a drive-by appraisal?

Drive-by appraisals follow the Uniform Standards of Professional Appraisal Practice (USPAP) but rely heavily on available external data and assumptions about the interior condition.

Full Appraisal: A comprehensive evaluation method where the appraiser inspects both the exterior and interior of the property for more accurate valuation.

Comparative Market Analysis (CMA): An estimate of a property’s market value based on similar properties that have recently sold in the area.

Broker Price Opinion (BPO): An estimate of a property’s value provided by a real estate broker or agent, often cheaper and less formal than a full appraisal.

Extraordinary Assumption: A presumptive condition assumed true without verification when specific details of a property cannot be observed or confirmed during the appraisal.

Uniform Standards of Professional Appraisal Practice (USPAP): Standards ensuring the quality and ethics of appraisal services.

Online Resources

Appraisal Institute Website: Appraisal Institute - Offers resources and information on appraisal practices
U.S. Department of Housing and Urban Development (HUD) - Appraisals: HUD Appraisals - Information on federal appraisal standards
Uniform Standards Professional Appraisal Practices (USPAP): USPAP Overview - Details and updates on appraisal standards

References

Investing in Real Estate by Gary W. Eldred, ISBN: 9780470499260
The Appraisal of Real Estate by Marsha W. Buchanan, ISBN: 9780922154766
Residential Real Estate Appraisal by Joseph F. Schram, ISBN: 9780793185922

Suggested Books for Further Studies

Modern Real Estate Practice by Fillmore W. Galaty, Wellington J. Allaway, Robert C. Kyle
Principles of Real Estate Practice by Stephen Mettling, David Cusic
Real Estate Appraisal: From A to Z by David C. Powell
Appraising and Selling the Family House by Mary A. Randolph
Mastering Real Estate Appraisal by Richard Betts, Sheppard

Real Estate Basics: Drive-By Appraisal Fundamentals Quiz

### What is a primary characteristic of a drive-by appraisal? - [x] It relies on an external inspection only. - [ ] It requires an interior inspection. - [ ] It involves a virtual tour. - [ ] It uses owner-provided photos. > **Explanation:** A drive-by appraisal is characterized by an assessment made exclusively based on the property's external view, without the benefit of inspecting the interior. ### Why might a drive-by appraisal be used in contested divorces? - [ ] It is more thorough. - [ ] It is easier to schedule. - [x] One party denies internal access. - [ ] It is mandatory in legal disputes. > **Explanation:** In contentious divorces, one party may deny the internal access to the appraiser, necessitating a drive-by appraisal based on exterior observations. ### What kind of assumption does an appraiser use when performing a drive-by appraisal? - [ ] Market assumptions - [x] Extraordinary assumptions - [ ] Null assumptions - [ ] Conditional assumptions > **Explanation:** An appraiser uses an extraordinary assumption, which surmises specific internal conditions that cannot be confirmed directly due to the lack of interior access. ### In what scenario might a lender accept a drive-by appraisal? - [ ] For all mortgage approvals - [x] During a foreclosure process - [ ] For newly built properties - [ ] For REO properties only > **Explanation:** Lenders might accept a drive-by appraisal, particularly during foreclosure processes, to estimate property value where internal access may be restricted or impractical. ### Which term refers to a comprehensive property evaluation method including both interior and exterior inspections? - [x] Full Appraisal - [ ] Comparative Market Analysis - [ ] Broker Price Opinion - [ ] Drive-By Appraisal > **Explanation:** A full appraisal involves both interior and exterior inspections, providing a more accurate assessment of the property's value compared to a drive-by appraisal. ### What is one disadvantage of a drive-by appraisal? - [ ] Requires extensive interior access - [ ] Has higher costs compared to full appraisals - [x] The potential inaccuracy of the condition assumptions - [ ] Takes longer to complete > **Explanation:** One disadvantage is the unreliability of value estimates derived from unverified interior conditions, leading to potential inaccuracies. ### Drive-by appraisals follow which standards? - [ ] Local real estate standards - [ ] Ethical Market Appraisal Standards - [x] Uniform Standards of Professional Appraisal Practice (USPAP) - [ ] Real Estate Valuation Protocols > **Explanation:** Drive-by appraisals adhere to the Uniform Standards of Professional Appraisal Practice (USPAP), ensuring a consistent level of appraisal quality and ethics. ### Are drive-by appraisals more or less costly than full appraisals? - [x] Less costly - [ ] More costly - [ ] Equally costly - [ ] Cost varies greatly > **Explanation:** Typically, drive-by appraisals are less costly because they require less time and effort compared to full appraisals, which involve interior inspections. ### What kind of property data does an appraiser mainly rely on during a drive-by appraisal? - [ ] Electrical system data - [ ] HVAC system data - [x] External visual cues and public records - [ ] Plumbing system data > **Explanation:** Drive-by appraisers mainly rely on external visual cues, publicly available records, and any information provided by the property owner or real estate agents, due to the lack of interior access. ### Why are drive-by appraisals used for remote properties? - [x] Accessing the interior is difficult or impractical. - [ ] They are more accurate. - [ ] They require multiple expert opinions. - [ ] They consume less legal resources. > **Explanation:** Drive-by appraisals are used in scenarios where accessing the interior is challenging or impractical, such as remote properties, providing a practicable yet limited market value estimate.

;