Property Inspection Waivers: Worth the risk?

If you are getting a loan for a home, your lender might give you the option to use a Property Inspection Waiver (PIW) on your application. The PIW program, begun by Fannie Mae in 2017, allows you to be approved for a mortgage without needing an appraisal. It's a newer concept, and some lenders love it. But what prompted it, and what are the risks for you as a home buyer?

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How do PIWs work?

Essentially, the value of your property is determined by your lender. They determine its value automatically on a computer, using a database from Fannie Mae instead of hiring a local appraiser to personally inspect the home you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely solely on computer methods to sort through a bank of previously collected data.

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Who's qualified for a Property Inspection Waiver?

The program's limited right now, but it's including more transaction types regularly. Your home has to have records in Fannie Mae's electronic database, so homes which have never been appraised are not eligible for a PIW. What's more, you need to have an excellent credit score and high assets to be approved.

Why is a PIW applied?

The waiver cancels out appraisal charges, and it can reduce closing time substantially for buyers. On the surface, this streamlined process sounds like a bargain — but there's a vital point you'll want to consider. With a PIW, your lender is NOT held liable if the assessment turns out to be wrong. That's an added benefit for lenders, but presents no protection to the home buyer whatsoever.

Could anything go wrong?

The information in Fannie Mae's database is derived from previous appraisal reports done by professional appraisers. it might be relatively accurate, but it won't necessarily be a current 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 absolutely be missed by the system.

Due to these deficiencies, you can imagine an instance where your home is priced too high by the program evaluating it. If that happens, you could run into problems 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 falls short.

What is the bottom line?

A definitive appraisal typically costs a few hundred dollars, but it can save you a substantial amount more in the future. With a PIW, there's clearly no guarantee you're receiving an honest valuation of a premium asset.

Dakota Plains Appraisal LLC can help.

Buying or refinancing a house is a big decision with big 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 accurate than the careful examination of a licensed professional you trust.