Appraisal Institute’s Response to Freddie Mac Research on Hybrid Appraisals
WASHINGTON, D.C. – RealEstateRama – The Appraisal Institute strongly urges policymakers, industry stakeholders, and the public to exercise caution when considering recent research findings published on Mar. 13 by Freddie Mac as justification for expanding the use of hybrid appraisals.
Freddie Mac claims that property data reports (PDRs) and hybrid appraisals outperform traditional appraisals in identifying serious property condition issues, yet the enterprise has not released the full research study supporting these conclusions. Without access to the methodology, sample size, and specific criteria used in their analysis, appraisal professionals are unable to independently evaluate these claims. If the data truly demonstrates such a significant improvement, why not make it available for full industry scrutiny?
Although the research highlights differences in condition rating and repair identification errors, it does not account for key distinctions between property data collectors and licensed or certified appraisers. Data collectors utilize an app-based collection tool and a standardized checklist developed by the GSEs, whereas appraisers undergo extensive training to assess property characteristics that influence value. While a uniform template may promote consistency in reporting, it does not necessarily lead to more accurate or credible valuations. Appraisers can provide a more reliable opinion of value when they personally inspect a property, rather than relying on photos and third-party data that may not fully capture the property’s true condition.
One of the biggest concerns with property data collectors is the lack of oversight and accountability in their role. While they may undergo background checks, there are no uniform standards for training, licensing, or ethical responsibilities like those required of appraisers. Yet, these individuals are granted access to homes, where they can document personal belongings, security systems, and other private details. If a homeowner has a concern or dispute regarding a data collector’s actions, there is little to no recourse available, as they are not held to the same professional or regulatory standards as licensed appraisers. This lack of accountability raises serious questions about privacy, security, and consumer protection.
Moreover, the financial impact of hybrid appraisals remains unproven. While proponents argue that hybrids reduce costs and improve efficiency, no independent analysis confirms that consumers actually benefit from lower fees or faster loan processing. In fact, separating data collection from valuation can introduce inefficiencies, requiring additional verification and corrections—especially when data collectors lack adequate training. The adoption of hybrids will also require significant changes to lender policies, procedures, and systems, potentially increasing costs that may be passed on to consumers.
The Appraisal Institute remains committed to upholding high professional standards, transparency, and consumer protection in the valuation process. Any move toward hybrid appraisals should be driven by independent, comprehensive research that thoroughly evaluates their cost, quality, impact on market participants, and potential risks to the financial system.
Appraisers are encouraged to take advantage of training opportunities in assigning condition ratings, identifying property deficiencies and needed repairs, and making accurate time and market condition adjustments. We welcome ongoing dialogue with policymakers, regulators, and industry leaders to ensure that appraisal practices continue to serve the best interests of consumers, lenders, and the broader real estate and financial markets.
