Are Property Inspection Waivers worth the risk?
If you're getting a loan for a home, your lender may give you the option to use a Property Inspection Waiver (PIW) on your loan application. The PIW program, initiated 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 drove the change, and what are the risks for you as a home buyer?
How do PIWs work?
Essentially, your lender decides what your home is worth. They determine its value automatically on a computer, employing an online database from Fannie Mae instead 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 solely on computer methods to sift through an array of previously collected data.
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Who can receive a Property Inspection Waiver?
The program is currently limited, but it is including more transaction types regularly. Your home needs to have entries 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're required to have an excellent credit score and high assets for approval.
Why do lenders use Property Inspection Waivers?
The waiver omits appraisal expenses, and it can shorten closing time substantially for buyers. Outwardly, this process seems like a good deal — but there's an essential point you will want to consider. With a PIW, your lender is NOT liable if the valuation turns out to be wrong. That's an added bonus for lenders, but presents zero protection to the home buyer.
Could anything go wrong?
The information in Fannie Mae's database is pulled from past appraisals completed by professional appraisers. it might be somewhat accurate, but it won't necessarily be a current assessment of the quality of a building that changes over time. Without a professional appraisal of your home, recent improvements and/or damages could certainly be overlooked by the system.
Due to these shortcomings, you can imagine a scenario where your home is priced too high by the program evaluating it. If that happens, you could run into problems when it's time to put it back on the market. You might not be able to get what you paid for it, and you'll have no recourse against your lender when the money starts adding up.
What is the bottom line?
A definitive appraisal usually costs a few hundred dollars, but it could save you thousands in the future. With a PIW, there's simply no guarantee you're getting an honest valuation of your most expensive asset.
Gregory James Company, Inc. can help.
Buying or refinancing a home is a big decision with big consequences. You should know with certainty that you're receiving 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 home, nothing is more accurate than the careful examination of a licensed professional you trust.