Is a Property Inspection Waiver worth the risk?
If you are getting a loan for a home, your lender might give you the option to use a Property Inspection Waiver – or PIW – on your loan application. The waiver program, introduced 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 caused it, and what risks are there for you?
How do PIWs work?
Essentially, your lender establishes what your home is worth. They determine its value systematically 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 on computer algorithms to sort through an array of previously collected information.
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Who's eligible for a PIW?
The program's currently limited, but it's expanding continually to include more transaction types. Your home has to have entries in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a PIW. Additionally, you're required to have an excellent credit score and high assets to be approved.
Why is it used?
The waiver removes appraisal expenses, and it can trim closing time substantially for buyers. On the surface, this process sounds like a good deal — but there's a bottom line you'll want to recognize. With a PIW, your lender is NOT held responsible if the valuation ends up wrong. That's great for lenders, but offers no protection to the buyer whatsoever.
What could happen if I accept a Property Inspection Waiver?
The information in Fannie Mae's database is derived from past appraisals done by professional appraisers. it might be accurate to some extent, but by definition, it will not be a current assessment of the quality of a building that changes over time. Without a professional appraisal of your home, new improvements, remodels, or damages can easily be neglected by the system.
Because of these shortcomings, you can imagine a situation where your property is priced too high by the computer program evaluating it. If that happens, you could run into issues when it's time to sell. You could end up settling for less than you paid, and you'll have no recourse against your lender when the money starts adding up.
What's the bottom line?
An accurate appraisal usually costs a few hundred dollars, but it could save you a substantial amount more in the future. With a Property Inspection Waiver, there's simply no guarantee you're receiving an honest valuation of your most expensive asset.
West Valley Appraisal Services can help.
Buying or refinancing a house is a big decision with big consequences. You should know without a doubt that you're getting a fair deal, and working with a licensed appraiser is the smartest 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 home, nothing is more precise than the careful assessment of a licensed professional you trust.