If you’re refinancing your home or considering a home equity loan, your lender may suggest a drive-by appraisal but what exactly does that mean?

Despite its casual name, a drive-by appraisal is a formal method of valuing your home. It became increasingly common during the pandemic and continues to serve a purpose in today’s real estate market. This type of appraisal offers a faster, more cost-effective way to estimate a home’s value, especially in low-risk transactions.

Here’s what homeowners in San Antonio and surrounding areas should know about drive-by appraisals, how they work, and when they make the most sense.

What Is a Drive-By Appraisal?

A drive-by appraisal, also known as an exterior-only appraisal, is a type of home valuation where the appraiser does not enter the home. Instead, the appraiser assesses the outside of the house and uses public records, tax data, and recent comparable sales to estimate the market value.

While this process skips the interior walkthrough, the appraiser makes an “extraordinary assumption” that the interior is in average condition unless noted otherwise.

This method is commonly used in refinancing scenarios, home equity loan applications, and low-risk transactions where interior upgrades or customization are not key drivers of value.

How Accurate Is a Drive-By Appraisal?

Drive-by appraisals can be reasonably accurate, if your home is in standard condition and doesn’t include significant upgrades. However, the absence of interior access means features like renovated kitchens, upgraded flooring, or custom fixtures are not factored into the final valuation.

“If your home has been updated or includes features that set it apart, a traditional appraisal will give you a more accurate estimate,” says Mary Helen Marks, an appraiser in the Phoenix Metro Area.

For homeowners looking to highlight improvements, opting for a full appraisal is often worth the investment.

Can Drive-By Appraisals Reduce Appraisal Bias?

Appraisal bias continues to be a concern, particularly in majority-Black and Latino neighborhoods. Research from Freddie Mac shows that homes in these communities are more likely to receive appraisals below contract price. A Brookings report revealed that this bias has cost Black homeowners billions in lost equity.

By focusing more on objective data such as recent comparable sales, square footage, and lot size, rather than interior aesthetics, drive-by appraisals may help reduce some of the unconscious bias that can occur during traditional in-person evaluations.

Benefits of Drive-By Appraisals

For many homeowners, this type of appraisal can be a smart solution. Here are some of the key advantages:

• Convenience: No need to prepare your home for a visit.
• Speed: Appraisal reports are usually returned faster.
• Affordability: They tend to cost less than full appraisals.
• Potential for less bias: More reliance on hard data may lead to fairer valuations.

Downsides to Consider

While drive-by appraisals are useful, they are not without limitations:

• No insight into interior condition: Renovations and upgrades will likely be missed.
• Assumptions may be incorrect: If your home is not in average condition, the value may be off.
• Not always accepted by lenders: Some financing situations require a traditional appraisal.

Is a Drive-By Appraisal Right for You?

If your home hasn’t undergone significant changes and you’re refinancing or applying for a home equity loan, a drive-by appraisal may be sufficient. It’s faster, less invasive, and more cost-effective than a traditional appraisal.

However, if you’ve made recent improvements or need a precise value for a sale or custom home, a full appraisal is likely the better option. Always speak with your lender or real estate agent to determine the best approach for your situation.

Frequently Asked Questions

Q: What is a drive-by appraisal?
A: A drive-by appraisal, also called an exterior-only appraisal, is a type of home valuation where the appraiser evaluates only the outside of the home and uses public data and recent comparable sales to determine value. No interior walkthrough is conducted.

Q: When is a drive-by appraisal used?
A: Drive-by appraisals are typically used for low-risk situations such as refinancing, home equity loans, or transactions that don’t rely heavily on a home’s interior condition.

Q: How accurate is a drive-by appraisal?
A: Accuracy depends on the condition of the home. If the interior has major upgrades, a drive-by appraisal may undervalue the home. For standard-condition homes, this method can offer a reliable estimate.

Q: Can I use a drive-by appraisal when selling my home?
A: Most home sales require a full appraisal. A drive-by appraisal may not account for important interior features that could raise your home’s value, so it’s not recommended for sellers who want to maximize pricing.

Q: Are drive-by appraisals accepted by all lenders?
A: Not all lenders accept drive-by appraisals, especially for purchase transactions. They are more commonly accepted for refinance or home equity loan scenarios. Your lender can confirm if this option is available.

Q: Do drive-by appraisals help reduce bias?
A: Yes. Since drive-by appraisals rely more on objective data, like tax records and comparable sales, they may reduce some bias tied to subjective in-person assessments.

Q: What are the pros of a drive-by appraisal?
A: Drive-by appraisals are faster, less expensive, and require no in-home visit. They also minimize disruptions and may lead to more equitable outcomes in certain communities.

Q: What are the cons of a drive-by appraisal?
A: They do not reflect interior upgrades, rely on assumptions about condition, and may not meet all lender requirements for accuracy or compliance.

Q: Should I get a drive-by appraisal or a traditional one?
A: If your home has recent updates or unique features, opt for a traditional appraisal. For quick refinancing or home equity estimates where interior condition is average, a drive-by appraisal may be a convenient alternative.

Need guidance on preparing for a refinance or appraisal in San Antonio? Reach out to Tami Price, Realtor, for expert advice on navigating your next step with confidence.