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The remote work revolution has spawned yet another evolution in real estate transactions.

Beginning March 19, 2022, Fannie Mae and Freddie Mac will accept remote desktop appraisals nationwide on eligible transactions without the appraiser ever stepping foot on the subject property, the Federal Housing Finance Agency (FHFA) announced.

Fannie and Freddie will accept desktop appraisals created with information from existing sources such as appraisal reports, multiple listing service (MLS) data and public record data.

The property information needs to be from a participant or source who does not hold a financial interest in the appraisal outcome. Appraisers also need to include a floor plan of the subject property when conducting desktop appraisals. For eligible transactions, the appraiser will use the Uniform Residential Appraisal Report (Desktop). [See Fannie Mae Form 1004 Desktop]


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The pandemic planted these seeds of change beginning in 2020. From April 2020 through May 2021, Fannie Mae and Freddie Mac implemented temporary flexibilities on appraisals, allowing them to be conducted entirely remotely or through a hybrid model. The purpose of these implementations was to keep the mortgage market functioning amid a patchwork of federal and local pandemic restrictions.

The need for greater flexibility in mortgage origination — and constantly shifting housing market conditions — necessitates evolution within the mortgage industry, according to FHFA’s acting director.

Desktop appraisal’s test run during the pandemic allowed Fannie and Freddie to gather feedback from real estate professionals who opted for the remote model.

Eligibility requirements

To be eligible for a desktop appraisal, a transaction needs to be for:

  • a one-unit property, not excluding those with an accessory dwelling unit (ADU) or units within a planned unit development (PUD);
  • a principal residence;
  • a purchase transaction (including new construction);
  • a property with a loan-to-value ratio (LTV) less than or equal to 90%; and
  • Fannie Mae’s Desktop Underwriter (DU) system, to receive an “Approve” or “Eligible” recommendation.

Ineligible transactions include:

  • two- to four-unit properties;
  • condominium and co-op units;
  • manufactured homes;
  • construction-to-permanent mortgages;
  • second homes and investment properties;
  • refinances;
  • energy-efficient mortgages;
  • secondary mortgages such as community seconds mortgages;
  • community land trusts;
  • DU casefiles that receive an “Ineligible” recommendation; and
  • manually underwritten mortgages.


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Desktop appraisal challenges and opportunities

This change confronts appraisers with new challenges and opportunities in the field.

But the appraisal industry has endured its fair share of regulatory, educational and technological changes since its adaptation as a specialized occupation arising out of the Great Depression.

One urgent challenge for the appraisal industry is the appraiser shortage stemming from an aging population and rigorous education and experience requirements for new entrants. Those who wish to join the profession in California need to complete 1,000 work hours in at least six months while working under the supervision of a certified residential or certified general licensed appraiser.

As of 2019, the number of licensed California appraisers had fallen to a new low. The total appraiser population in the state plunged below 10,000 licensees for the first time since recording began in 1993. The number of active licensees is even lower, estimated to be around 8,000. For reference, the total population of appraisal licensees peaked slightly above 20,000 in 2007, according to the Bureau of Real Estate Appraisers (BREA).

Although there are fewer appraisers in the field than before, today’s appraisers are better educated, better compensated and more tech-savvy than in previous generations.

In fact, appraisers have placed a greater focus on tech when hiring. Firms are at a competitive disadvantage when they rely on outdated technology. This is particularly true when an appraisal company wants to attract and retain the newest generation of appraisers. This demographic, steeped from a young age in rapidly shifting technological advancements, anticipates using the latest technology in their work.

As the older generation of appraisers approaches retirement age, the younger generation will step up to the plate armed with today’s budding innovations in tech. The BREA’s more stringent licensing and certification requirements will lead to greater earnings for appraisers, thanks to their high level of training and relative scarcity within the trade. As of 2020, the annual salary of a property appraiser averages around $88,000 in California, according to the Bureau of Labor Statistics.

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Another challenge for today’s appraisers involves the traditional method for collecting valuation data. The traditional method relies on an appraiser visually inspecting the interior and exterior of a property. For properties in rural areas, an appraiser needs to allocate extra time to drive from property to property.

Demand for rural space is increasing as well, making these treks into the countryside increasingly common for residential appraisers when they rely exclusively on traditional methods of gathering data. As of 2019, the U.S. mortgage market is larger in rural communities than in urban ones, according to Freddie Mac.

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Appraisal bias

Another long-term — but newly salient — challenge plaguing the appraisal industry is the racial appraisal gap.

Racial appraisal gaps have made troubling headlines recently within the real estate industry. Racial bias within the appraisal process is now under scrutiny thanks in part to a sea of reports that surfaced in 2020 on how non-white homeowners received greater valuations after hiding personal items like photographs that identified the homeowner’s minority status. In a common refrain among these reports, one family replaced all traces of Blackness (including portraits, photo cards — even books by Black authors) with those of a white family — and their home’s valuation went up 40% upon reappraisal.

Some of this boils down to the nature of appraisals. Appraisal is an inherently subjective practice teetering between art and science. Still, the reports illustrate a clear pattern of devaluation of minority-owned properties that too often hinges on who answers the door.

Eliminating these appraisal biases is a growing concern of the FHFA, who vows to promote equitable access to mortgage credit for all people and communities, including underserved communities.

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In response to this crisis, the California legislature passed Assembly Bill 948 near the end of 2021.

As of January 1, 2022, California buyers, sellers and homeowners who receive an appraisal value they believe to be below market value may file a complaint form provided by the California Bureau of Real Estate Appraisers (BREA). The form also allows complainants to provide their demographic information, which the BREA will study in an effort to better understand appraisal gaps.

In addition, all licensed California appraisers will need to complete three supplementary hours of continuing education requirements every four years beginning January 1, 2023. The extra education hours will encompass cultural competency and bias elimination training.

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Embracing the change

Despite these notable challenges, wide-ranging in scope as they may be, opportunities await the appraisal and mortgage industries.

Those opportunities include making the valuation process quicker, more efficient, less costly and more equitable — all without sacrificing accuracy.

Appraisers who embrace this new technology will find themselves ahead of a steep learning curve, as they have in the past.

However, the implementation of permanent desktop appraisals has some appraisers concerned about using incomplete or unreliable property information all without ever physically setting eyes on the interior or exterior of a property. Appraisers will also be relying more closely on floor plans than ever before.

Beginning March 2022, desktop appraisals will be an option for eligible homes where property data is plentiful and accurate. Those who remain skeptical about their ability to remotely estimate a home’s value may still choose to rely on the tried and true traditional approach that physical observations provide.

But at least now an alternative is available, particularly useful for homes way out in rural communities when ample, reliable data exists.

Although it’s not an easy time for appraisers, mortgage holders and other industry professionals, desktop appraisals represent a futuristic shift for those willing to embrace change.

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