Hybrid Appraisal: A New Valuation Model That Can Impact Your Home Value
Hybrid appraisals are faster than traditional appraisals. But are they accurate? Our industry experts weigh in.
You’re selling your home, and you’ve scheduled your appraisal appointment. Except for one problem. The person who shows up at your door isn’t an appraiser at all, but an inspection specialist. She’s there for a hybrid appraisal, she tells you.
Hybrid? Like the car?
Not quite. A hybrid appraisal is a type of alternative appraisal where a third party, such as a second appraiser, a real estate licensee, or another authorized person, performs the field inspection for the home valuation — not the assigned appraiser.
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Unlike a traditional appraisal, where the appraiser completes both the field inspection and market data analysis, an appraiser following the hybrid process uses the third party’s observations in the final valuation. By outsourcing the fieldwork, appraisers can focus on analyzing the local market and comparable sales instead of juggling homeowner appointments and driving to assigned homes.
There’s some debate in the real estate industry as to the accuracy of hybrid appraisals. To learn more about how hybrid appraisals could impact your property valuation, we spoke with Swapnil Sharma, a top Texas-based real estate agent who sells homes 52% quicker than the average agent in her area, and Pia Loeper, a certified real estate appraiser, based in California.
What’s a hybrid appraisal?
A newer appraisal type, the hybrid format emerged in the mid- to late-2010s as a faster method for property valuation. It essentially combines traditional appraisal methods with technology.
A third-party inspection agent takes photos and measurements of the property instead of the appraiser doing it in person. The appraiser then uses that data, along with other information, to complete the property’s valuation remotely.
While used primarily for loan servicing and default scenarios, Sharma says she’s seen a rise in lender use of hybrid appraisals for refinance loans, less so for purchases. One factor driving the new format: a shortage of licensed appraisers. With fewer available appraisers, the faster hybrid reports could help mitigate long turnaround times caused by fewer available appraisers.
Fannie Mae first began working on its own hybrid appraisal form (Form 1004) in 2018, a sign of the hybrid appraisal’s growing acceptance in the mortgage industry. Meanwhile, Freddie Mac’s hybrid appraisal report (Form 70H) forms part of its Automated Collateral Evaluation (ACE) + Property Data Report (PDR) program, which was launched in 2022.
The program allows lenders to originate eligible loans without a traditional appraisal. If the lender identifies conditions or characteristics from the PDR that warrant further evaluation, they can upgrade to a hybrid assessment.
When the 2020 pandemic hit, government restrictions, such as stay-at-home orders, forced the real estate industry to rely more heavily on technology. The emerging hybrid appraisal became a more widely adopted alternative as lenders adjusted to rapidly changing market conditions.
