Property Inspection Waivers: Are they worth the risk?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 program, started by Fannie Mae in 2017, allows you to be approved for a mortgage without an appraisal. It's a relatively new concept, and some lenders love it. But what prompted it, and what are the risks for you as a home buyer? 
How do PIWs work?Basically, your lender determines what your property is worth. They determine its value automatically on a computer, using an online database from Fannie Mae instead of hiring a local appraiser to inspect the property you're about to buy. So, rather than a firsthand evaluation, lenders rely solely on computer algorithms to sort through a pile of previously collected data. Get your appraisal from Carly Krieg Appraisals today Get a quote onlineWho can receive a PIW?The program is limited currently, but it is being built regularly to include more types of transactions. Your home needs to have records in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a PIW. What's more, you're required to have an excellent credit score and high assets to be approved. Why is a PIW used?The waiver cancels out appraisal fees, and it can substantially reduce closing time for buyers. On the surface, this process sounds like a good deal — but there's a bottom line you'll want to recognize. With a PIW, your lender is NOT held responsible if the assessment ends up wrong. That's a bonus for lenders, but terrible for the buyer. 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 by definition, it won't be an up-to-date evaluation of the exterior and interior quality in a building that changes over time. Without a professional appraisal of your home, recent improvements and/or damages could certainly be left out by the system. Because of these deficiencies, you can imagine an instance where your home is priced too high by the program assessing it. If that happens, you could run into issues when it's time to sell. You could wind up getting far 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 appraisal typically costs a few hundred dollars, but it could save you a substantial amount more in the long run. With a Property Inspection Waiver, there is no guarantee you're receiving an honest valuation of a premium asset. Carly Krieg Appraisals can help. Buying or refinancing a property is a big decision with grand 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 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. |