Don't risk your home with a Property Inspection Waiver

If you are getting a loan for a home, your lender may 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 needing an appraisal at all. It's a newer concept, and some lenders love it. But what prompted it, and what risks are there for you as a home buyer?

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How do Property Inspection Waivers work?

Basically, determining how much your house is worth falls into the hands of your lender. They determine its value automatically on a computer, using a database from Fannie Mae rather than 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 methods to sift through an array of previously collected data.

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Who's qualified for a PIW?

The program's limited currently, but it is including more transaction types regularly. Your home needs to have records in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a Property Inspection Waiver. What's more, you're required to have an excellent credit score and high assets to be approved.

Why do lenders use it?

The waiver cancels out appraisal charges, and it can considerably pare down closing time for buyers. At first glance, this simplified process sounds like a good deal — but there's a key point you'll want to keep in mind. With a PIW, your lender is NOT held responsible if the valuation ends up wrong. That's an added benefit for lenders, but affords no protection to the home buyer whatsoever.

What could go wrong?

The information in Fannie Mae's database is pulled from previous appraisal reports done by professional appraisers. This data might be relatively accurate, but it won't necessarily be a current evaluation of the quality of a building that's regularly 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 a situation where your property is priced too high by the system evaluating it. If that happens, you could run into issues when it's time to list it for sale. You could end up settling for far less than you paid, and you'll have no recourse against your lender when the money falls short.

What's the bottom line?

A definitive appraisal typically costs a few hundred dollars, but it could save you a great deal more in the long run. With a Property Inspection Waiver, there is absolutely no guarantee you're getting an honest valuation of your most expensive asset.

Hayes Appraisal Group, Inc. can help.

Buying or refinancing a home is a big decision with grand consequences. You want to know with certainty that you're receiving 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 assessment of a licensed professional you trust.