Don't risk your home with a Property Inspection Waiver
If you are buying or refinancing 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 risks for you as a home buyer?
How does a Property Inspection Waiver work?
Essentially, determining how much your home is worth falls into the hands of your lender. They determine its value systematically on a computer, using an online database from Fannie Mae instead of hiring a local appraiser to inspect the home you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely on computer processes to sort through a trove of previously collected information.
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Who's eligible for a PIW?
The program is currently limited, but it's progressively building to include more transaction types. Your property needs to have records in Fannie Mae's electronic database, so homes which have never been appraised are not eligible for a Property Inspection Waiver. What's more, you must have an excellent credit score and high assets for approval.
Why is a PIW used?
The waiver cancels out appraisal fees, and it can shorten closing time considerably for buyers. At first glance, this simplified process sounds like a bargain — but there's a bottom line you'll want to consider. With a PIW, your lender is NOT held responsible if the assessment turns out to be wrong. That's an added bonus for lenders, but offers no protection to the buyer whatsoever.
What could happen if I agree to a Property Inspection Waiver?
The information in Fannie Mae's database is pulled from past appraisal reports done by professional appraisers. This data might be accurate to some extent, but it won't necessarily be a current evaluation of the exterior and interior quality in a building that's constantly changing. Without a professional appraisal of your home, recent improvements, remodels, or damages can absolutely be neglected by the system.
Because of these shortcomings, you can imagine a situation where your property is priced too high by the computer program evaluating it. If that happens, you could run into problems when it's time to sell. You might not be able to receive what you paid for it, and you'll have no recourse against your lender when the money falls short.
What is the bottom line?
An accurate, professional appraisal typically costs a few hundred dollars, but it can save you a lot more in the long run. With a PIW, there's no guarantee that you're receiving an honest valuation of a premium asset.
J. Boyles Appraisals, LLC can help.
Buying or refinancing a property is a big decision with big consequences. You should know with certainty that you're getting a fair deal, and working with a licensed appraiser is the safest action you can take. 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 examination of a licensed professional you trust.