Don't risk your investment with a Property Inspection Waiver
If you're buying or refinancing a home, your lender might give you the option to use a Property Inspection Waiver (PIW) on your application. The waiver program, begun by Fannie Mae in 2017, allows you to move forward with your mortgage without getting an appraisal. It's a newer concept, and some lenders love it. But what caused the change, and what risks are associated?
How do PIWs work?
Essentially, what your home is worth is established by your lender. They determine the value systematically on a computer, using a database from Fannie Mae in lieu of hiring a local appraiser to personally inspect the home you're about to buy. So, rather than a firsthand evaluation, lenders rely on computer algorithms to sort through a bank of previously collected data.
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Who is qualified for a Property Inspection Waiver?
The program's currently limited, but it's including more types of transactions continuously. Your home has to have entries in Fannie Mae's electronic database, so homes which have never been appraised aren't eligible for a PIW. What's more, you must have an excellent credit score and high assets to be approved.
Why do lenders use it?
The waiver eliminates appraisal expenses, and it can trim closing time substantially for buyers. Outwardly, this simplified process sounds like a bargain — but there's an essential point you will want to recognize. With a PIW, your lender is NOT liable if the assessment is wrong. That's great for lenders, but presents no protection to the buyer whatsoever.
What could go wrong?
The information in Fannie Mae's database is derived from past appraisal reports done by professional appraisers. This data might be accurate to a degree, but it won't necessarily be a current evaluation of the quality of a building that's constantly changing. Without a professional valuation of your home, recent improvements and/or damages could absolutely be omitted by the system.
Due to these deficiencies, it's easy to imagine an instance where your home is priced too high by the computer program assessing 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 can save you a great deal more in the future. With a Property Inspection Waiver, there is absolutely no guarantee you're getting an honest valuation of your most expensive asset.
Jensen Appraisals Florida can help.
Buying or refinancing a home is a big decision with big consequences. You should know without a doubt that you're receiving a fair deal, and working with a licensed appraiser is the smartest 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 property, nothing is more precise than the careful examination of a licensed professional you trust.