Don't risk your investment with a Property Inspection Waiver
If you are buying or refinancing a home, your lender may give you the option to use a Property Inspection Waiver (PIW) on your application. The PIW program, introduced by Fannie Mae in 2017, allows you to be approved for a mortgage without getting an appraisal at all. It's a newer concept, and some lenders love it. But what determined the change, and what risks are associated?
How does a PIW work?
Basically, the value of your property is established by your lender. They determine the value automatically on a computer, employing an online database from Fannie Mae rather than hiring a local appraiser to personally inspect the home you're about to buy. So, rather than a firsthand evaluation, lenders rely on computer processes to sort through a bank of previously collected information.
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Who can get a Property Inspection Waiver?
The program is limited right now, but it is being expanded continually to include more types of transactions. Your property has to have records in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a PIW. What's more, you're required to have an excellent credit score and high assets to be approved.
Why is it applied?
The waiver omits appraisal expenses, and it can shorten closing time considerably for buyers. At first glance, this process sounds like a good deal — but there's a bottom line you'll want to keep in mind. With a PIW, your lender is NOT held responsible if the assessment winds up being wrong. That's an added bonus for lenders, but affords zero protection to the home buyer.
What could happen if I agree to a Property Inspection Waiver?
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 won't be a current evaluation of the quality of a building that changes from year by year. Without a professional valuation of your home, recent improvements, renovations, or damages could absolutely be overlooked by the system.
Because of these shortcomings, it's easy to imagine a scenario where your home is valued too high by the computer program assessing it. If that happens, you could run into issues when it's time to put it back on the market. 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's the bottom line?
An accurate, professional appraisal usually costs a few hundred dollars, but it can save you thousands (or tens of thousands) in the long run. With a PIW, there is no guarantee you're receiving an honest valuation of a premium asset.
RICHARD GRECO APPRAISALS can help.
Buying or refinancing a home is a big decision with grand consequences. You need to know without a doubt that you're getting 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 home, nothing is more precise than the careful examination of a licensed professional you trust.