Don't risk your home with a Property Inspection Waiver
If you're getting a loan for a home, your lender might 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 move forward with your mortgage without requiring an appraisal. It's a newer concept, and some lenders love it. But what drove it, and what risks are there for you as a home buyer?
How does a Property Inspection Waiver work?
Essentially, what your home is worth is determined by your lender. They determine the value systematically on a computer, employing a database from Fannie Mae in lieu of hiring a local appraiser to inspect the property you're getting ready to buy. So, rather than a hands-on evaluation, lenders rely on computer algorithms to sort through a bank of previously collected information.
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Who's qualified for a Property Inspection Waiver?
The program's currently limited, but it is progressively expanding to include more transaction types. Your property needs to have records in Fannie Mae's electronic database, so homes which have never been appraised aren't eligible for a Property Inspection Waiver. Additionally, you must have an excellent credit score and high assets to be approved.
Why do lenders use PIWs?
The waiver cancels out appraisal expenses, and it can considerably pare down closing time for buyers. On the surface, this simplified process sounds like a bargain — but there's a bottom line 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 a benefit to lenders, but affords no protection to the buyer.
Could anything go wrong?
The information in Fannie Mae's database is derived from past appraisal reports completed by professional appraisers. it might be relatively accurate, but by definition, it will not be an up-to-date evaluation of the quality of a building that's constantly changing. Without a professional appraisal of your home, recent improvements and/or damages can certainly be omitted by the system.
Due to these deficiencies, it's easy to imagine an instance where your property is valued too high by the computer 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's the bottom line?
An accurate appraisal typically costs a few hundred dollars, but it could save you a substantial amount more in the long run. With a Property Inspection Waiver, there's no guarantee you're receiving an honest valuation of your most expensive asset.
West Valley Appraisal Services can help.
Buying or refinancing a property is a big decision with big consequences. You demand to know with certainty that you're getting 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 examination of a licensed professional you trust.