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 – or PIW – on your application. The program, introduced by Fannie Mae in 2017, allows you to be approved for a mortgage without getting an appraisal at all. It's a relatively new concept, and some lenders love it. But what caused it, and what risks are there for you?
How does a PIW work?
Basically, deciding how much your property is worth falls into the hands of your lender. They determine the value systematically on a computer, using a database from Fannie Mae instead of hiring a local appraiser to inspect the home you're about to buy. So, rather than a hands-on evaluation, lenders rely on computer algorithms to sort through a bank of previously collected data.
Get your appraisal from Duncan Appraisals todayGet a quote today
Who's qualified for a Property Inspection Waiver?
The program is currently limited, but it's progressively expanding to include more types of transactions. Your home needs to have entries in Fannie Mae's electronic database, so homes that have never been appraised aren't eligible for a PIW. Additionally, you must have an excellent credit score and high assets to be approved.
Why do lenders use Property Inspection Waivers?
The waiver cancels out appraisal charges, and it can shorten closing time considerably for buyers. Outwardly, this process seems like a good deal — but there's a vital point you will want to keep in mind. With a PIW, your lender is NOT held liable if the valuation turns out to be wrong. That's an added bonus for lenders, but terrible for the buyer.
What could happen if I accept a Property Inspection Waiver?
The information in Fannie Mae's database is derived from previous appraisals completed by professional appraisers. This data might be accurate to some extent, but it won't necessarily be an up-to-date assessment of the exterior and interior quality in a building that's regularly changing. Without a professional appraisal of your home, recent improvements, renovations, or damages could absolutely be left out by the system.
Due to these deficiencies, you can imagine an instance where your property is priced too high by the system assessing it. If that happens, you could run into problems when it's time to put it back on the market. You could wind up getting less than you paid, and you'll have no recourse against your lender when the money falls short.
What's the bottom line?
An accurate, professional appraisal typically costs a few hundred dollars, but it can save you thousands (or tens of thousands) in the future. With a PIW, there's no guarantee you're receiving an honest valuation of a premium asset.
Duncan Appraisals can help.
Buying or refinancing a home is a big decision with grand consequences. You demand 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 are in nearly 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.