A bifurcated appraisal, also referred to as a hybrid appraisal, is one in which the responsibility is shared by two people. This means that one person inspects the property while another completes the valuation remotely. The rationale behind splitting the responsibility is usually time and cost related. Having two people work together speeds up the process, which in turn brings down the appraisal fee.
As with any type of appraisal, there are certain properties and situations for which a bifurcated appraisal might not be suitable. It is also important to consider the implications of sharing the responsibilities of inspecting and appraising the property.
When it comes to using third-party inspectors and property data, there is always the risk of inaccuracy, which is worth considering when deciding if a bifurcated appraisal is the right approach.
Bifurcated Appraisal – Pros and Cons
Advantages of a Bifurcated Appraisal
As mentioned above, bifurcated appraisals are often favored for their short turnaround time. This makes them a suitable option if an appraisal is needed on short notice. They are also significantly cheaper than full appraisals, making them an attractive choice for anyone hoping to save money in the already expensive process of financing a home. Bifurcated appraisals are most often used for residential mortgages and loan servicing.
Disadvantages of a Bifurcated Appraisal
There are certain trade-offs that come with the advantage of saving time and money. When it comes to bifurcated appraisals, the most prevalent of these is the potential for inaccuracy. This can arise when the job of property inspection is delegated to a third-party inspector.
The biggest issue with having someone other than the licensed appraiser do the inspection is that there are no regulations dictating who can or can’t perform the relevant checks. This can be problematic because the inspector, if not a qualified appraiser themselves, might over- or underestimate the value of the property.
Licensed appraisers are trained to observe any design or structural features, particular building materials, or deficiencies within the property that inevitably influence its value. A third-party inspector might not take such things into account, especially if they are not involved with the client or the appraisal beyond simply performing the inspection. In a situation where the value of the property has been miscalculated based on insufficient data, it would be the appraiser taking the hit because it is up to them to verify any and all data pertaining to a valuation, even if they did not directly obtain it themselves.
Bifurcated Appraisal Summary
There are pros and cons to bifurcated appraisals that determine their suitability for different appraisal assignments. They can be an attractive option for saving time and money, but it’s important to be aware of the compromises this entails. When it comes to appraisals, being accurate and thorough is key. So by ensuring that both parties involved in the appraisal understand what is required for the inspection, a bifurcated appraisal can be a viable option for property valuation.