Don't risk your investment with a Property Inspection Waiver

If you're buying or refinancing a home, your lender may give you the option to use a Property Inspection Waiver (PIW) on your application. The waiver program, begun by Fannie Mae in 2017, allows you to be approved for a mortgage without getting an appraisal at all. It's a newer concept, and some lenders love it. But what motivated it, and what are the risks for you?

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How do Property Inspection Waivers work?

Basically, your lender decides what your house is worth. They determine the value systematically on a computer, using a database from Fannie Mae rather than hiring a local appraiser to personally inspect the property you're about to buy. So, rather than a firsthand evaluation, lenders rely solely on computer processes to sort through a bank of previously collected data.

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Who's qualified for a PIW?

The program is limited right now, but it is including more transaction types regularly. Your home needs to have records in Fannie Mae's electronic database, so homes that have never been appraised aren't eligible for a PIW. Additionally, you need to have an excellent credit score and high assets to be approved.

Why do lenders use it?

The waiver eliminates appraisal charges, and it can substantially shorten closing time for buyers. On the surface, this streamlined process sounds like a good deal — but there's a vital point you'll want to keep in mind. With a PIW, your lender is NOT held responsible if the assessment ends up wrong. That's great for lenders, but awful for the buyer.

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. 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 over time. Without a professional valuation of your home, recent improvements, renovations, or damages can absolutely be missed by the system.

Due to these deficiencies, it's easy to imagine a situation where your home is valued too high by the system assessing it. If that happens, you could run into problems when it's time to list it for sale. You could wind up settling for less than you paid, and you'll have no recourse against your lender when the money starts adding up.

What is the bottom line?

An accurate appraisal usually costs a few hundred dollars, but it could save you thousands in the long run. With a Property Inspection Waiver, there's simply no guarantee you're receiving an honest valuation of your most expensive asset.

Gregory James Company, Inc. can help.

Buying or refinancing a property is a big decision with big consequences. You want to know without a doubt that you're getting a fair deal, and working with a licensed appraiser is the smartest 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 accurate than the careful assessment of a licensed professional you trust.