Don't risk your home with a Property Inspection Waiver
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 waiver program, begun by Fannie Mae in 2017, allows you to move forward with your mortgage without an appraisal at all. It's a newer concept, and some lenders love it. But what caused it, and what risks are associated?
How do PIWs work?
Basically, deciding how much your house is worth falls into the hands of your lender. They determine its value systematically on a computer, using a database from Fannie Mae instead of hiring a local appraiser to inspect the home you're about to buy. So, rather than a hands-on evaluation, lenders rely on computer methods to sift through a trove of previously collected data.
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Who's eligible for a PIW?
The program's currently limited, but it's including more transaction types continuously. Your property has to have entries in Fannie Mae's electronic database, so homes that have never been appraised aren't eligible for a PIW. What's more, you need to have an excellent credit score and high assets to be approved.
Why is it applied?
The waiver removes appraisal fees, and it can cut closing time substantially for buyers. At first glance, this streamlined process seems like a good deal — but there's a key point you'll want to recognize. With a PIW, your lender is NOT held responsible if the valuation winds up being wrong. That's great for lenders, but a disadvantage to the home buyer.
What could go wrong?
The information in Fannie Mae's database is pulled from past appraisals done by professional appraisers. it might be accurate to a degree, but by definition, it will not be a current assessment of the exterior and interior quality in a building that changes from year by year. Without a professional valuation of your home, recent improvements and/or damages could certainly be missed by the system.
Because of these shortcomings, you can imagine an instance where your home is priced too high by the system assessing it. If that happens, you could run into problems when it's time to put it back on the market. 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's the bottom line?
An accurate, professional appraisal usually costs a few hundred dollars, but it can save you thousands (or tens of thousands) in the future. With a PIW, there is clearly no guarantee that you're getting an honest valuation of a premium asset.
Tasador, Inc can help.
Buying or refinancing a property is a big decision with grand consequences. You should 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 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.