Appraisal Waiver - Yes or No?
If you're getting a loan for a home, your lender may give you the option to use a Property Inspection Waiver (PIW) – or Appraisal Waiver – on your loan application. The waiver program, begun by Fannie Mae in 2017, allows you to be approved for a mortgage without an appraisal at all. Some lenders love it.
But what prompted the change, and what risks are there for you?
How Does a Property Inspection Waiver Work?
Basically, the task of deciding how much your home is worth falls into the hands of your lender. They determine the value systematically on a computer, employing an online database from Fannie Mae rather than hiring a local appraiser to personally inspect the home you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely solely on computer processes to sort through an array of previously collected data.
Who Can Get a Property Inspection Waiver?
The program's limited currently, but it is progressively building to include more transaction types. Your home has to have entries in Fannie Mae's electronic database, so homes that have never been appraised aren't eligible for a PIW. Additionally, you must have an excellent credit score and high assets for approval.
Why Do lenders Use Property Inspection Waivers?
The waiver cancels out appraisal charges, and it can cut closing time substantially for buyers. At first glance, this process seems like a bargain — but there's a key point you'll want to recognize. With a PIW, your lender is NOT held liable if the valuation ends up wrong. That's an added benefit for lenders, but a disadvantage to the home buyer.
What Could Go Wrong If I Agree To a PIW?
The information in Fannie Mae's database is pulled from previous appraisal reports done by professional appraisers. This data might be accurate to some extent, but by definition, it will not be an up-to-date assessment of the exterior and interior quality in a building that's constantly changing. Without a professional appraisal of your home, recent improvements and/or damages could certainly be overlooked by the system.
Due to these deficiencies, you can imagine a scenario where your property is priced too high by the system assessing it. If that happens, you could run into snags when it's time to list it for sale. You might not be able to get what you paid for it, and you'll have no recourse against your lender when the money starts adding up.
Even if the sale qualifies for a PIW, you can still get an appraisal. However, it will be up to you to contact, schedule and pay for the home appraisal. You want to know without a doubt that you're receiving a fair deal, and working with a licensed appraiser is the safest way to go.
What's The Bottom Line?
An accurate appraisal usually costs a few hundred dollars, but it could save you a lot more in the future. With a PIW, there's no guarantee you're receiving an honest valuation of a premium asset.
Master Appraisal Services can help.
Buying or refinancing a house is a big decision with big consequences. You want to know without a doubt that you're receiving a fair deal, and working with a licensed appraiser is the safest way to go. Computers and algorithms are in nearly every area of modern life, but when it comes to measuring the value of your property, nothing is more accurate than the careful assessment of a licensed professional you trust.
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