Don't risk your home with a Property Inspection Waiver

If you are 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 program, started 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 drove the change, and what risks are there for you?

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How do Property Inspection Waivers work?

Basically, determining what your home is worth falls into the hands of your lender. They determine its value systematically on a computer, using a database from Fannie Mae rather than hiring a local appraiser to inspect the property you're getting ready to buy. So, rather than a manual evaluation, lenders rely on computer algorithms to sort through a bank of previously collected data.

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Who is qualified for a Property Inspection Waiver?

The program is currently limited, but it is including more transaction types continuously. Your property has to have records in Fannie Mae's electronic database, so homes that have never been appraised aren't eligible for a PIW. What's more, you're required to have an excellent credit score and high assets to be approved.

Why is a PIW used?

The waiver eliminates appraisal fees, and it can shorten closing time considerably for buyers. On the surface, this simplified process seems like a bargain — but there's a key point you will want to recognize. With a PIW, your lender is NOT held responsible if the valuation turns out to be wrong. That's a bonus for lenders, but presents no protection to the home buyer whatsoever.

What could happen if I accept a PIW?

The information in Fannie Mae's database is derived from past appraisal reports done by professional appraisers. This data might be somewhat accurate, but by definition, it will not be an up-to-date assessment of the exterior and interior quality in a building that changes from year to year. Without a professional appraisal of your home, recent improvements and/or damages could absolutely be missed by the system.

Because of these deficiencies, it's easy to imagine an instance 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 starts adding up.

What is the bottom line?

An accurate, professional appraisal typically costs a few hundred dollars, but it could save you thousands in the future. With a Property Inspection Waiver, there's no guarantee you're receiving an honest valuation of a premium asset.

Nordquist Appraisal can help.

Buying or refinancing a property is a big decision with big consequences. You want to know with certainty that you're receiving a fair deal, and working with a licensed appraiser is the safest 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 assessment of a licensed professional you trust.