Is a Property Inspection Waiver worth the risk?
If you're getting a loan for a home, your lender might give you the option to use a Property Inspection Waiver (PIW) on your loan application. The program, introduced by Fannie Mae in 2017, allows you to move forward with your mortgage without getting an appraisal at all. It's a newer concept, and some lenders love it. But what motivated the change, and what are the associated risks?
How does a PIW work?
Essentially, your lender decides what your property is worth. They determine the value systematically on a computer, using a database from Fannie Mae rather than hiring a local appraiser to inspect the home you're about to buy. So, rather than a manual evaluation, lenders rely solely on computer processes to sift through an array of previously collected data.
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Who is qualified for a Property Inspection Waiver?
The program's limited right now, but it's progressively building to include more types of transactions. Your property needs to have records in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a PIW. Additionally, you're required to have an excellent credit score and high assets for approval.
Why is a PIW used?
The waiver eliminates appraisal charges, and it can cut closing time substantially for buyers. At first glance, this process sounds like a bargain — but there's an essential point you'll want to consider. With a PIW, your lender is NOT held liable if the assessment ends up wrong. That's a bonus for lenders, but a disadvantage to the home buyer.
Could anything go wrong?
The information in Fannie Mae's database is derived from past appraisals done by professional appraisers. This data might be accurate to a degree, but by definition, it will not be an up-to-date evaluation of the exterior and interior quality in a building that's regularly changing. Without a professional valuation of your home, recent improvements and/or damages could absolutely be overlooked by the system.
Because of these shortcomings, you can imagine an instance where your property is valued too high by the program assessing it. If that happens, you could run into snags when it's time to sell. You could wind up getting less than you paid, and you'll have no recourse against your lender when the money starts adding up.
What's the bottom line?
An accurate, professional appraisal typically costs a few hundred dollars, but it can save you thousands in the future. With a Property Inspection Waiver, there's absolutely no guarantee you're receiving an honest valuation of a premium asset.
Eady Appraisal Services can help.
Buying or refinancing a home is a big decision with grand consequences. You should know without a doubt that you're receiving a fair deal, and working with a licensed appraiser is the safest action you can take. Computers and algorithms have assumed a place in almost every area of modern life, but when it comes to measuring the value of your property, nothing is more precise than the careful assessment of a licensed professional you trust.