Property Inspection Waivers: Worth the risk?
If you're 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 PIW program, introduced by Fannie Mae in 2017, allows you to move forward with your mortgage without an appraisal. It's a newer concept, and some lenders love it. But what drove it, and what risks are associated?
How do PIWs work?
Basically, what your home is worth is established by your lender. They determine its value systematically on a computer, employing 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 manual evaluation, lenders rely entirely on computer methods to sift through a bank of previously collected information.
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Who is qualified for a PIW?
The program's currently limited, but it is including more types of transactions continuously. Your property has to have records in Fannie Mae's electronic database, so homes which have never been appraised are not eligible for a Property Inspection Waiver. Additionally, you're required to have an excellent credit score and high assets to be approved.
Why do lenders use PIWs?
The waiver omits appraisal charges, and it can substantially pare down closing time for buyers. On the surface, this process sounds like a good deal — but there's a bottom line you'll want to consider. With a PIW, your lender is NOT held liable if the assessment ends up wrong. That's an added benefit for lenders, but affords no protection to the home buyer.
Is there anything that could go wrong?
The information in Fannie Mae's database is derived from past appraisals completed by professional appraisers. This data might be accurate to a degree, but it won't necessarily be a current assessment of the exterior and interior quality in a building that's regularly changing. Without a professional valuation of your home, new improvements, renovations, or damages could certainly be overlooked by the system.
Due to these deficiencies, you can imagine a scenario where your property is valued too high by the program evaluating it. If that happens, you could run into issues when it's time to sell. You could wind up settling for less than you paid, and you'll have no recourse against your lender when the money falls short.
What is the bottom line?
A definitive appraisal typically costs a few hundred dollars, but it can save you a lot more in the future. With a Property Inspection Waiver, there's no guarantee that you're receiving an honest valuation of your most expensive asset.
West Valley Appraisal Services can help.
Buying or refinancing a home is a big decision with grand consequences. You demand to know with certainty that you're receiving a fair deal, and working with a licensed appraiser is the smartest action you can take. Computers and algorithms are in almost 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.