What Is a Drive-By Appraisal and When Is It Used?

Property appraisals provide a professional opinion of a property’s market value, often required by lenders for purchases, refinances, or other financial endeavors. While a comprehensive appraisal involves a detailed inspection, a “drive-by appraisal” offers a streamlined approach. This method focuses on external observations and readily available data to assess a property’s worth.

Defining a Drive-By Appraisal

A drive-by appraisal, also termed an exterior-only appraisal or a Form 2055 appraisal, involves a licensed appraiser assessing a property solely from its exterior. The appraiser does not enter the home, focusing instead on observable features from the street or curb. Despite the limited physical inspection, it remains a formal valuation conducted by a qualified professional.

The external review includes observing the property’s curb appeal, visible structural elements, and overall maintenance. The valuation heavily incorporates publicly available data and extensive market analysis to form a credible opinion of value.

Common Scenarios for Use

Lenders and financial institutions often employ drive-by appraisals in specific situations where a full interior inspection is not deemed necessary due to reduced risk or the nature of the transaction. This appraisal type is common for certain refinancing transactions, particularly those with a low loan-to-value ratio or rate-and-term refinances. These scenarios often present a lower borrowing risk for lenders, making a less intensive valuation acceptable.

Drive-by appraisals are also utilized for portfolio reviews, allowing lenders to periodically reassess property values within existing loan portfolios without the expense and time of full appraisals. In instances such as properties nearing foreclosure, a drive-by appraisal can provide an estimated value when interior access is not feasible. This method is chosen for quicker, more cost-effective valuations when sufficient external data supports a reliable assessment.

Information Utilized in a Drive-By Appraisal

Although a drive-by appraisal limits the appraiser’s physical inspection to the property’s exterior, a substantial amount of information is gathered from various external sources. Appraisers routinely consult public records, such as property tax records, county assessor data, and property deeds, to obtain details like lot size, square footage, and ownership history. This data provides foundational information about the property’s characteristics.

Multiple Listing Service (MLS) data is another primary resource, offering details on comparable sales, active listings, and historical property information, often including interior photos from previous transactions. Geographic Information Systems (GIS) and aerial photography, including satellite imagery and street-view tools, allow appraisers to assess the property’s location, lot configuration, and surrounding environment in detail. The appraiser’s direct external observation of the property’s condition, visible features, and the overall neighborhood also contributes to the valuation.

Distinguishing from Other Appraisal Types

A drive-by appraisal differs significantly from a traditional, full interior appraisal primarily in the scope of inspection. A full appraisal involves the appraiser physically entering the property to conduct a detailed interior and exterior examination, noting the condition, quality of finishes, and any improvements. This direct interior access allows for a more comprehensive assessment of elements that might influence value, such as recent renovations or hidden defects.

In contrast, a drive-by appraisal relies heavily on external data and assumptions about the interior, as direct observation is limited to the outside. While both provide a professional opinion of value, a full appraisal typically offers a more detailed and potentially more accurate valuation due to its comprehensive scope. Drive-by appraisals are generally less expensive, often ranging from $100 to $200, and quicker to complete, usually taking a few days, compared to full appraisals which can cost $300 to $500 or more and take longer. The choice between these appraisal types depends on the specific requirements of the transaction and the lender’s risk assessment.