Don't risk your investment with a Property Inspection Waiver
If you are 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, started by Fannie Mae in 2017, allows you to be approved for a mortgage without an appraisal at all. It's a newer concept, and some lenders love it. But what motivated the change, and what risks are there for you?
How does a PIW work?
Essentially, your lender determines what your property is worth. They determine the value automatically on a computer, using a database from Fannie Mae in lieu of hiring a local appraiser to personally inspect the home you're about to buy. So, rather than a manual evaluation, lenders rely entirely on computer methods to sort through an array of previously collected data.
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Who is qualified for a PIW?
The program is currently limited, but it is including more transaction types regularly. Your home has to have records in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a PIW. What's more, you're required to have an excellent credit score and high assets for approval.
Why do lenders use Property Inspection Waivers?
The waiver omits appraisal fees, and it can reduce closing time substantially for buyers. On the surface, this process seems like a good deal — but there's a bottom line you will want to recognize. With a PIW, your lender is NOT held liable if the valuation turns out to be wrong. That's an added benefit for lenders, but affords zero protection to the buyer.
What could happen if I agree to a Property Inspection Waiver?
The information in Fannie Mae's database is pulled from past appraisals done by professional appraisers. it might be accurate to a degree, but it won't necessarily be a current evaluation of the exterior and interior quality in a building that changes from year to year. Without a professional valuation of your home, new improvements and/or damages can certainly be overlooked by the system.
Because of these shortcomings, you can imagine a scenario where your property is valued too high by the computer program assessing it. If that happens, you could run into problems when it's time to list it for sale. 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's the bottom line?
An accurate appraisal typically costs a few hundred dollars, but it could save you a lot more in the future. With a Property Inspection Waiver, there is simply no guarantee that you're receiving an honest valuation of a premium asset.
Professional Appraisal Services LLC can help.
Buying or refinancing a home is a big decision with big consequences. You should know without a doubt that you're getting a fair deal, and working with a licensed appraiser is the safest move you can make. Computers and algorithms have assumed a place 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.