Hybrid Appraisals: Growth, Risks & What You Need to Know
In this issue:
- Hybrid Appraisals Grow: GSEs push hybrid appraisals, raising concerns over data accuracy and independence.
- Cost & Time Unclear: No proof hybrid appraisals save money or speed up valuations.
- Advocate for Appraisers: Join AI’s Legislative Day to shape industry policies.
Insights
The Shift Toward Hybrid Appraisals: A Growing Concern
Hybrid appraisals have expanded significantly in recent years, particularly as the GSEs—Fannie Mae and Freddie Mac—have increasingly embraced alternative valuation methods. What was once a supplementary option is now becoming a widespread practice that is rapidly replacing traditional appraisals.
Appraisal waivers are most prevalent in refinance transactions where some argue interest rate or loan term reductions reduce risk to the loan. As of December 2024, 9.1 percent of Fannie Mae purchase loans and 13.5 percent of Freddie Mac purchase loans received appraisal waivers, according to data from the American Enterprise Institute.
However, as appraisal waivers have remained steady, hybrid appraisals have become more prevalent. In these appraisals, property data is collected by a third party and provided to an appraiser for analysis. This method is promoted to improve efficiency, but concerns persist about data accuracy, appraiser independence, and consumer protection.
Hybrid appraisals are increasingly used in purchase loan situations, though they remain more common in refinance transactions. Lenders and the GSEs have expanded their use in purchase markets to address perceived inefficiencies in the traditional appraisal process. However, purchase transactions often involve more complexity and market variability compared to refinances. The reliance on third-party data collection in these cases could introduce additional risks related to property condition, neighborhood nuances, and other factors that are critical to accurate valuations.
Do Hybrid Appraisals Lower Costs and Reduce Turn Times?
Despite claims that hybrid appraisals reduce costs, there is currently no comprehensive evaluation available on the actual financial impact to consumers. While proponents argue hybrid appraisals streamline the process and lower fees, that has not been independently verified. Without independent analysis, it is difficult to determine whether consumers ultimately benefit from lower costs.
Proponents argue that hybrid appraisals reduce costs and speed up the process, making home financing more efficient. However, the reality is more complex. The separation of data collection from analysis can introduce inefficiencies, requiring additional verification and corrections that ultimately delay the process. There may be examples of quicker turnaround times, however, the promised efficiencies may not be realized in cases where data collectors lack the necessary training, requiring appraisers to spend additional time addressing deficiencies. The net effect on cost and efficiency remains an open question, with significant variation depending on implementation and oversight.
Advocate for the Profession: Join the Appraisal Institute’s First Annual Legislative Day
The rise of hybrid appraisals underscores the need for appraisers to have a strong voice in shaping policies that impact the profession. To address these challenges, the Appraisal Institute is hosting its first-ever Legislative Day, bringing appraisers to Washington, D.C., to engage directly with lawmakers on critical issues affecting valuation standards, consumer protections, and the future of the profession. Now is the time to engage in discussions, push for responsible policies, and reinforce the essential role of professional appraisers in ensuring fair and accurate property valuations.
Your Benefits
New Member Offer: Free Business Practices and Ethics Course for Associate Members
The Appraisal Institute is making it easier than ever for new professionals to start their journey in valuation with a special membership incentive. For a limited time, new Associate Members joining during March and April 2025 will receive access to the Business Practices and Ethics course, required within the first year of membership, at no cost.
This offer is a great opportunity for aspiring appraisers to take advantage of the resources, education, and professional network that Appraisal Institute membership provides. The Business Practices and Ethics course equips members with essential knowledge of ethical standards and best practices, setting them up for long-term success in the profession.
Do you know someone who would benefit from this offer? Encourage your colleagues, trainees, or peers to join the Appraisal Institute today. By referring new members, you’re helping to strengthen the profession and build a community of appraisers committed to excellence.
For more details or to refer a new member, visit our Join Now page.
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Sign up for our next free webinar
Avoiding “Bad” Words: Residential and Commercial Perspectives in Appraisal Report Narrative Writing and Cultural Competency
March 20, 2025
12-1pm EST
Appraisers use fact to develop opinions of value, and it is unfortunate, and potentially costly, when an appraiser’s choice of words in narrative sections of an appraisal report are misleading or misconstrued to the point that doubt is cast on the validity of the appraiser’s facts. However, appraisers can take a proactive approach in phrasing their reports to affirm the impartiality of their basis for value determinations and reduce related ROV requests.
Ready to equip you with the tools to write stronger narrative passages in your reports, our panelists will discuss:
- The impact of subjective language
- Wording changes to reduce pushback and increase clarity
- Handling subjective property characteristics
- Connecting descriptions and supporting data
Advocacy Updates
Appraisal Foundation Council Meetings
The Appraisal Foundation’s (TAF) Council to Advance Residential Equity (CARE) and Industry Advisory Council (IAC), held their quarterly meetings on March 3-4 in Clearwater Beach, Florida. The Appraisal Institute was represented by Government Affairs Director Scott DiBiasio.
CARE includes non-profits focused on fair housing and consumer rights, while IAC represents for-profit appraisal service users like banks, appraisal management companies and real estate firms. Both Councils received updates from TAF leadership, as well as from the Chairs of the AQB and ASB.
TAF announced a new initiative, TEACH 2025, to enhance appraisal education. The AQB reaffirmed the 2026 requirement for appraisers to complete fair housing and valuation bias education and announced forthcoming FAQs on these topics. ASB Chair Nicholas Pilz discussed whether USPAP represents a Standard of Care and ongoing efforts related to artificial intelligence, reconsiderations of value, and short-term rental valuations.
The IAC meeting focused on implementing UAD 3.6, concerns over appraisal quality in commercial mortgage lending, and the potential development of a “UAD-C” standard for commercial appraisals. The Council also debated eliminating the Licensed Residential credential and revising experience requirements for licensure and certification.
Supporting Appraisers Affected by Government Workforce Reductions
The recent elimination of appraisal positions in the federal government has impacted appraisers working in public service, leaving many facing unexpected career transitions. At the Appraisal Institute, we recognize the challenges these workforce reductions create and want to assure affected professionals that they are not alone. Your expertise and contributions to the appraisal profession remain valuable, and we are committed to providing support during this time.
Advocacy and Awareness
As the leading organization representing appraisers, the Appraisal Institute Government Relations Committee has placed this matter on its agenda for discussion to assess its impact on the profession and explore potential advocacy efforts. We remain engaged in ensuring that policymakers understand the essential role appraisers play in government operations and beyond.
Resources for Your Next Steps
If you have been affected by these job eliminations, consider utilizing the resources available through the Appraisal Institute:
- Networking & Community – Connect with other professionals through our local chapters, online forums and industry events. Expanding your network can help uncover new career opportunities.
- Professional Development – Whether transitioning to private practice or another role in the profession, our education programs and certifications can enhance your skills and marketability.
- Financial Assistance & Scholarships – The AI Education and Relief Foundation provides financial assistance and scholarship opportunities for appraisers facing hardship. If you need support in continuing your education or maintaining your credentials, this resource may be available to you.
- Advocacy & Representation – We are committed to supporting our members in times of transition and ensuring that decision-makers recognize the importance of appraisers in public service. If you have insights to share, we welcome your input.
You Are Not Alone
Career transitions can be challenging. The Appraisal Institute is here to support you with advocacy, professional development, financial assistance, and a network of peers who understand your experience.
If you have been affected and would like to share your thoughts or learn more about available resources, please reach out. We are here to help you navigate the path forward.
Appraiser’s Perspective on the FHFA Valuation Modernization Summit
The Federal Housing Finance Agency (FHFA) held its second Valuation Modernization Summit on Feb. 26 in Washington, D.C., bringing together industry stakeholders to discuss the future of real estate valuation. The Appraisal Institute was represented at the Summit by Immediate Past President Sandra Adomatis, SRA; Director of Government Affairs Scott DiBiasio; and Senior Manager of Federal Affairs Brian Rodgers.
Real Estate Horizons
Stay updated and check out links to the latest major real estate industry stories!
More Opportunities to Learn
Search the latest educational offerings! Find National and Chapter-sponsored classroom, synchronous, and online opportunities.
Our Community
Celebrating Women in the Appraisal Profession
In honor of International Women’s Day, we recognize and celebrate the contributions of women in the appraisal profession. The Women’s Initiative Committee (WIN), established in 2019, was originally organized by a group of dedicated professionals, including current AI President Paula Konikoff, MAI, AI-GRS. WIN is dedicated to increasing visibility, leadership opportunities, and support for women in the field.
WIN actively fosters professional growth through initiatives such as the Women’s Initiative Spotlight Award, an annual recognition of appraisers who have made an important contribution to fostering the growth of women in the valuation profession. Additionally, our Mentorship Program is designed to guide and support newer appraisers as they advance in their careers.
To further strengthen our community, WIN has developed a Chapter Resource Guide to assist in establishing and expanding WIN committees at the Chapter and Regional levels. We encourage all AI members to get involved—whether by joining an existing WIN committee or starting one in your Chapter. For assistance in launching a WIN committee, please contact us.
Until next week,
Team Appraisal Institute
