Don't risk your home with a Property Inspection Waiver
If you are buying or refinancing a home, your lender might give you the option to use a Property Inspection Waiver – or PIW – on your loan application. The PIW program, started by Fannie Mae in 2017, allows you to be approved for a mortgage without an appraisal. It's a newer concept, and some lenders love it. But what determined the change, and what are the risks for you?
How do PIWs work?
Essentially, the task of deciding how much your home is worth falls into the hands of your lender. They determine the value automatically on a computer, employing an online database from Fannie Mae rather than hiring a local appraiser to personally inspect the property you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely solely on computer processes to sift through a pile of previously collected information.
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Who can receive a PIW?
The program's currently limited, but it is including more transaction types regularly. 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. Additionally, you're required to have an excellent credit score and high assets to be approved.
Why is a Property Inspection Waiver applied?
The waiver cancels out appraisal charges, and it can considerably pare down closing time for buyers. On the surface, this streamlined process seems like a bargain — but there's a vital point you will want to consider. With a PIW, your lender is NOT liable if the valuation turns out to be wrong. That's an added benefit for lenders, but terrible for the home buyer.
Could anything go wrong?
The information in Fannie Mae's database is pulled from previous appraisal reports completed by professional appraisers. it might be accurate to some extent, but by definition, it won't 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 easily be omitted by the system.
Because of these shortcomings, it's easy to imagine a situation where your home is valued too high by the computer program evaluating it. If that happens, you could run into snags when it's time to put it back on the market. You could end up settling for far less than you paid, and you'll have no recourse against your lender when the money falls short.
What is the bottom line?
An accurate, professional appraisal usually costs a few hundred dollars, but it could save you thousands in the future. With a PIW, there's absolutely no guarantee you're receiving an honest valuation of a premium asset.
Gregory James Company, Inc. 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 safest 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 property, nothing is more accurate than the careful assessment of a licensed professional you trust.