Are Property Inspection Waivers worth the risk?If you're getting a loan for a home, your lender might give you the option to use a Property Inspection Waiver (PIW) on your loan application. The PIW program, initiated by Fannie Mae in 2017, allows you to be approved for a mortgage without an appraisal. It's a relatively new concept, and some lenders love it. But what caused it, and what are the risks for you as a home buyer? 
How do Property Inspection Waivers work?Essentially, your lender establishes what your home is worth. They determine its value automatically on a computer, employing an online database from Fannie Mae in lieu of hiring a local appraiser to inspect the home you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely solely on computer processes to sift through a bank of previously collected data. Get your appraisal from Marty Tehrani today Get a quote onlineWho is qualified for a PIW?The program is limited currently, but it's building regularly to include more transaction types. Your home needs to have records in Fannie Mae's electronic database, so homes that have never been appraised aren't eligible for a Property Inspection Waiver. What's more, you must have an excellent credit score and high assets for approval. Why do lenders use PIWs?The waiver omits appraisal fees, and it can considerably pare down closing time for buyers. On the surface, this process seems 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 turns out to be wrong. That's great for lenders, but offers no protection to the home buyer whatsoever. What could go wrong?The information in Fannie Mae's database is pulled from previous appraisals done by professional appraisers. it might be accurate to some extent, but it won't necessarily be an up-to-date evaluation of the exterior and interior quality in a building that's regularly changing. Without a professional appraisal of your home, recent improvements, remodels, or damages can easily be omitted by the system. Due to these deficiencies, you can imagine a situation where your property is priced too high by the program assessing it. If that happens, you could run into issues when it's time to list it for sale. You may not be able to receive what you paid for it, and you'll have no recourse against your lender when the money falls short. What is the bottom line?An accurate, professional appraisal typically costs a few hundred dollars, but it can save you thousands in the future. With a PIW, there is clearly no guarantee you're receiving an honest valuation of your most expensive asset. Marty Tehrani can help. Buying or refinancing a house is a big decision with grand consequences. You demand 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 are in nearly 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. |