Is a Property Inspection Waiver worth the risk?
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 an appraisal at all. It's a newer concept, and some lenders love it. But what caused the change, and what risks are there for you?
How does a Property Inspection Waiver work?
Essentially, the task of deciding what your home is worth falls into the hands of your lender. They determine the value automatically on a computer, employing an online database from Fannie Mae in lieu of hiring a local appraiser to personally inspect the home you're getting ready to buy. So, rather than a hands-on evaluation, lenders rely on computer processes to sift through a trove of previously collected information.
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Who can get a Property Inspection Waiver?
The program's limited currently, but it's including more types of transactions continuously. Your home 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 to be approved.
Why do lenders use it?
The waiver eliminates appraisal fees, and it can cut closing time considerably for buyers. On the surface, this simplified process sounds like a good deal — but there's an essential point you'll want to consider. With a PIW, your lender is NOT held liable if the valuation winds up being wrong. That's a benefit to lenders, but a disadvantage to the buyer.
What could go wrong if I agree to a PIW?
The information in Fannie Mae's database is pulled from past appraisal reports done by professional appraisers. it might be somewhat accurate, but by definition, it will not be a current assessment of the quality of a building that changes over time. Without a professional valuation of your home, recent improvements and/or damages can easily be omitted by the system.
Due to these shortcomings, it's easy to imagine a situation where your property is priced too high by the system evaluating it. If that happens, you could run into snags when it's time to list it for sale. You may 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 substantial amount more in the long run. With a Property Inspection Waiver, there's no guarantee that you're getting an honest valuation of a premium asset.
Integrated Assets can help.
Buying or refinancing a home is a big decision with big consequences. You need to know without a doubt that you're getting a fair deal, and working with a licensed appraiser is the smartest way to go. 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 examination of a licensed professional you trust.
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