B4-1.2-02, Desktop Appraisals (12/14/2022)

Overview

A desktop appraisal reported on the Uniform Residential Appraisal Report (Desktop) (Form 1004 Desktop) is permitted for certain transactions. The minimum scope of work for Form 1004 Desktop does not include a current inspection of the subject property or comparable sales by the appraiser; the appraiser relies on data obtained from alternative methods or sources to identify property characteristics and condition.

Completing the Form 1004 Desktop

Subject property information may be obtained from one or more data sources. The appraiser can accept data, photos, floor plans, and other information from a party who has a financial interest in the sale or financing of the property if the appraiser verifies such data from a disinterested source. The appraiser must determine if the information is accurate and reliable to produce a credible report, which includes the features, quality, and condition of the subject property.

Virtual inspection methods (including digital photos or videos) or other technological solutions (such as a machine-generated floor plan) can augment the data and imagery used for a desktop appraisal. Information provided by the homeowner, potential borrower, or a third party can be used to develop the description of the interior and exterior of the improvements. Extraordinary assumption(s) or appraisals made "subject to" verification of the subject property's condition, quality, or physical characteristics are not permitted.

The lender remains responsible for the description of the property, and the accuracy and of all data on the appraisal that pertains to the property. This includes the property's condition and quality ratings. The lender is also responsible for ensuring the property meets the property eligibility requirements in this Selling Guide. Lastly, the lender remains responsible for any life-of-loan representations and warranties that may apply to the property or the appraisal.

Exhibits: Form 1004 Desktop requires the same exhibits as traditional appraisals, plus a floor plan. The Square Footage-Method for Calculating: ANSI Z765-2021 standard and exception code (GXX001- in the Additional Features field) is not required for desktop appraisals, but encouraged when feasible. See B4-1.2-01, Appraisal Report Forms and Exhibits for additional information.

Entry of Appraisal Assignment Type: The appraiser must provide the Appraisal Assignment Type and supporting details (located in the Additional Comments section of the appraisal report) as shown in the following table.

DU Messaging: For loan casefiles that are eligible for a desktop appraisal option, DU will issue a message informing the lender they can choose to obtain an appraisal reported on Form 1004 Desktop. DU will also issue messages for other appraisal options. The lender may select from any of the options presented, which may include an appraisal waiver, desktop appraisal, or traditional appraisal.

Eligible Transactions

To be eligible for a desktop appraisal, transactions must meet the following criteria:

• one-unit property (including those with an ADU and units in a PUD),
• principal residence,
• purchase transaction (including new construction),
• LTV ratio less than or equal to 90%, and
• DU loan casefile that receives an Approve/Eligible recommendation.

Ineligible Transactions

The following transactions are not eligible for a desktop appraisal:

• two- to four-unit properties;
• condo and co-op units;
• manufactured homes;
• construction-to-permanent loans (single-close and two-close);
• second homes and investment properties;
• all refinances;
• HomeReady, HomeStyle Renovation, and HomeStyle Energy loans;
• Community Seconds with a subsidized sales price;
• Community land trusts, or other properties with resale price restrictions (loan casefiles using the Affordable LTV feature);
• DU loan casefiles that receive an Ineligible recommendation; and
• manually underwritten loans.

Representations and Warranties

When a desktop appraisal is reported on Form 1004 Desktop and submitted through the UCDP, the appraisal will be scored by Collateral Underwriter (CU). All eligible loans with a desktop appraisal that receive a CU risk score of 2.5 or less are eligible for enforcement relief of certain representations and warranties related to the appraisal value of the subject property (see  A2-2-06, Representations and Warranties on Property Value  for complete requirements and additional information).