Desktop valuation refers to the process of determining the value of something with limited information, and is also known as a desktop appraisal. The term is most often used when valuing real estate, but it can apply to valuing businesses as well. Here's what you need to know about desktop valuation, and why you might want to use one.
What is a desktop valuation?
A desktop valuation is a process performed by a licensed and certified real estate appraiser which uses publicly available information in order to assess the value of a property. The appraiser will likely use tax records to find out information about the property, and will evaluate comparable sales ("comps") in the area to determine its value.
Because of the need for solid information about the property and the local real estate market, desktop valuations are typically performed on homes in established, stable neighborhoods where there is plenty of comparable sale data to evaluate. So, a home in a neighborhood where half of the homes are in foreclosure wouldn't be a great candidate for desktop valuation, nor would a rural property with no close neighbors.
It's important to note that a desktop valuation does not include a physical inspection of the property, and can be completed without the appraiser leaving their desk -- hence the use of the word "desktop."
The alternative to a desktop valuation is to order a full appraisal of the property. In a full appraisal, the appraiser goes to the home, takes pictures and measurements, and thoroughly evaluates the condition of the property.
Reasons to use a desktop valuation instead of a full appraisal
The most compelling reason to use a desktop valuation is the cost savings. A desktop valuation typically costs between $75 and $200, while a full appraisal can cost $500 or more. It is also a quicker and more hassle-free way to get a written estimate of a home's value.
Desktop valuations are most accurate and useful for homes in average condition, and have become acceptable by many lenders for certain types of loans. If you are planning to apply for a home equity line of credit, for instance, a desktop valuation may be all your lender requires.
Drawbacks and limitations
The major drawback to a desktop valuation is that it makes a lot of assumptions. Without actually seeing a property in person, it's difficult to know if the publicly available information on square footage and the property's features is accurate.
Also, I mentioned earlier that a desktop valuation typically assumes that a property is in average condition, so it's unlikely to provide an accurate valuation for properties that are in poor condition, or those with brand-new renovations.
Because of their shortcomings, desktop valuations are not universally accepted by lenders, so be sure to check what type of appraisal your lender requires before you order one.
Ready to put your dollars to work for you? Hop over to The Motley Fool's Broker Center and get started today.
This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at email@example.com. Thanks -- and Fool on!