Property Inspection Waivers: Are they worth the risk?If you are buying or refinancing a home, your lender might give you the option to use a Property Inspection Waiver (PIW) on your loan application. The PIW program, begun by Fannie Mae in 2017, allows you to move forward with your mortgage without an appraisal at all. It's a relatively new concept, and some lenders love it. But what caused the change, and what are the associated risks? 
How do Property Inspection Waivers work?Essentially, the task of deciding what your house is worth falls into the hands of your lender. 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. Get your appraisal from Evaluating Property in the MidSouth (EPM) today Get a quote onlineWho can get a Property Inspection Waiver?The program is currently limited, but it's progressively expanding to include more types of transactions. Your home has to have records 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 for approval. Why do lenders use PIWs?The waiver cancels out appraisal charges, and it can cut closing time substantially for buyers. Outwardly, this streamlined process sounds like a good deal — but there's a bottom line you will want to keep in mind. With a PIW, your lender is NOT liable if the valuation winds up being wrong. That's great for lenders, but awful for the home buyer. What could go wrong if I accept a Property Inspection Waiver?The information in Fannie Mae's database is pulled from previous appraisal reports completed by professional appraisers. This data might be relatively accurate, but by definition, it won't be a current evaluation of the exterior and interior quality in a building that's regularly changing. Without a professional valuation of your home, recent improvements, remodels, or damages could certainly be neglected by the system. Due to these shortcomings, it's easy to imagine a scenario where your property is valued too high by the system evaluating it. If that happens, you could run into issues when it's time to put it back on the market. You could wind up settling for far 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, professional appraisal typically costs a few hundred dollars, but it can save you a great deal more in the future. With a PIW, there is simply no guarantee that you're receiving an honest valuation of your most expensive asset. Evaluating Property in the MidSouth (EPM) can help. Buying or refinancing a home is a big decision with grand consequences. You need to know with certainty that you're getting a fair deal, and working with a licensed appraiser is the safest way to go. 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. |