Political Correctness and Windshield Appraisals
By Charlie Elliott, Jr., MAI, SRA

They used to call them “Windshield Appraisals,” then they became “Drive By Appraisals” and more recently the more politically correct buzzwords or term is Exterior Only Inspection Appraisals. If that reminds you of going from “trailers” to “mobile homes” to “manufactured houses,” you are on the right track.

It seems that anymore, any issue encompassing even the slightest hint of negativity, necessitates a new more sophisticated term to soften its impact every few years. Did you ever notice that being politically correct is never a problem when we deal with positives or issues that most everyone can agree upon as being pure and or of high quality? Where our society usually plays the political correctness card, is when we are trying to make something seem more or better than it is or than it is perceived to be. While the purpose of this article is not to dwell upon political correctness, where there is smoke there is usually fire. When we are dealing with the “Real McCoy,” we seldom need excuses or have reason to insert softer, more palatable terms into our vocabulary. Conversely, there just might be some reason to question the basis for changes in terminology when the current descriptive wording appears to be “on the money.” Notice the reference to the term “money.”

While I have no problem with the Exterior Only Inspections in an appraisal, I do think that it may be worth our time to visit the issue and discuss some of the not so subtle difference between the appraisal with Interior Inspection and the Exterior Only Inspection. I will be the first to acknowledge that there is a time and a place for the Exterior Only instrument, and those of us in the profession should consider it our responsibility to provide the service in cases where it is appropriate even though these appraisals have their limitations.

Why would anyone want an appraisal with an Exterior Only Inspection? That may seem like a good question, but, to some clients, there are a few obvious answers that cannot be denied, not the least of which is when the occupant will not permit access to the dwelling. Within our company, many of the requests that we get for Exterior Only Inspection Appraisals have to do with circumstances surrounding foreclosures or the potential for foreclosure. Lets face it; many of these occupants are not happy campers, and their frustrations are usually blamed on or directed to the mortgage companies they are dealing with. In some cases, I have been able to obtain access to a property by coaxing the occupants of a soon-to-be-foreclosed-upon property to give me a quick peek inside, and in others I have not. Even when I have been able to obtain permission, I have had the feeling that someone may be just around the corner with a sawed-off shotgun pointed in my direction, so I am not wild about inspecting the interior of the property when the occupants offer the prospect of being hostile.

Getting down to “where the rubber meets the road,” I would like to ask you, the reader, a question. Would you buy a house without closely inspecting the exterior as well as the interior of a property? Needless to say, most of us would not. Usually, we, as buyers, not only insist upon seeing the inside of a property a minimum of two or three times, but we also hire a professional inspector to go underneath the home and in the attic to perform inspections which we are unable to do. There’s a reason for this; it’s called evaluation. Can you imagine a woman who would not insist upon seeing the bathrooms and kitchens of a home prior to selecting and purchasing it? Details of the home do make a difference in its value, a lot of difference. These details include quality, condition, color, layout, design, size, and function.

Since we base our appraisals on the actions of buyers, why then would it not be proper for the appraiser to follow a similar procedure if he or she is to do a creditable job? The multiple listing books are full of comparable sales where houses with similar looking exteriors located, in the same neighborhood, sell for drastically different amounts per square foot.

Prove it to yourself the next time you have access to this data. Most multiple listing services provide a price-per-square-foot for homes both offered for sale and for those that have sold. I recently performed such an exercise in a neighborhood near me and found that the prices ranged from $80 to $162 per square foot or a variance of about 100%. Some, but not all, of the homes look about the same from the street. Many of the issues creating the disparity are not apparent from the street, and, while prices usually will not vary 100% strictly based upon factors that cannot be viewed from the street, I am of the opinion, based upon further study and observation, that this portion of the variance could amount to 50%.

In conclusion, limitations many times dictate the use of Exterior Only Inspection Appraisals, primarily because it may be difficult, if not impossible, to obtain permission to enter a property. In such cases something is better than nothing, so go for it. Where it is possible to obtain and Interior Inspection on a property being appraised, I strongly recommend it. The cost of the service will be little more and the time to prepare it will perhaps be somewhat different, but usually not a deal breaker. A good example of the potential differences, if we are to believe my survey and my rough calculations, would be for a house having a value on the low side of $200,000 to $300,000 on the high side. My discussion with lenders and other clients have led me to the conclusion, however, that they sometimes have too much confidence in the Exterior Only Inspection Appraisal and sometimes they make decisions with the appraisal as if an interior inspection had been made. It has been my experience that many clients expect the variance between the complete inspection and the limited inspected to be very low, say 5 to 10 %. While it could be the case, in most cases the variance will be much broader. This could be a dangerous rule of thumb, as most prudent underwriting decisions require much tighter data.

The term Exterior Only Inspection Appraisal may be politically correct and have a nice ring to it but, when it comes decision time, tell me it is Windshield Appraisal, just so I don’t become too confident.

Charlie W. Elliott, Jr., MAI, SRA, is President of ELLIOTT® & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889 or at charlie@elliottco.com or through the company’s Web site at www.appraisalsanywhere.com.