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 application. The PIW program, begun by Fannie Mae in 2017, allows you to move forward with your mortgage without needing an appraisal. It's a relatively new concept, and some lenders love it. But what drove it, and what risks are there for you as a home buyer?
How do Property Inspection Waivers work?
Basically, determining what your house is worth falls into the hands of your lender. They determine its value automatically on a computer, employing an online database from Fannie Mae instead of hiring a local appraiser to inspect the home you're about to buy. So, rather than a manual evaluation, lenders rely entirely on computer processes to sort through a trove of previously collected data.
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Who's eligible for a PIW?
The program's currently limited, but it's including more transaction types continuously. Your property has to have records in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a Property Inspection Waiver. Additionally, you're required to have an excellent credit score and high assets for approval.
Why is a Property Inspection Waiver used?
The waiver eliminates appraisal fees, and it can considerably reduce closing time for buyers. At first glance, this streamlined process sounds like a bargain — but there's a bottom line you'll want to recognize. With a PIW, your lender is NOT held liable if the assessment turns out to be wrong. That's great for lenders, but presents no protection to the buyer whatsoever.
Could anything go wrong?
The information in Fannie Mae's database is derived 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, new improvements, remodels, or damages can certainly be left out 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 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, professional appraisal usually costs a few hundred dollars, but it could save you a lot more in the long run. With a PIW, there is absolutely no guarantee that you're receiving an honest valuation of a premium asset.
Gregory James Company, Inc. can help.
Buying or refinancing a house is a big decision with grand consequences. You should know with certainty 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 precise than the careful assessment of a licensed professional you trust.