Are 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 waiver program, begun by Fannie Mae in 2017, allows you to be approved for a mortgage without needing an appraisal at all. It's a relatively new concept, and some lenders love it. But what caused it, and what risks are there for you as a home buyer?

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How do Property Inspection Waivers work?

Basically, your lender determines what your house is worth. They determine the value systematically on a computer, using an online database from Fannie Mae rather than hiring a local appraiser to inspect the home you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely on computer processes to sift through a bank of previously collected data.

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Who can get a Property Inspection Waiver?

The program's currently limited, but it is including more types of transactions regularly. Your property needs to have entries in Fannie Mae's electronic database, so homes which have never been appraised are not eligible for a Property Inspection Waiver. Additionally, you must have an excellent credit score and high assets to be approved.

Why do lenders use PIWs?

The waiver removes appraisal fees, and it can considerably reduce closing time for buyers. At first glance, this streamlined process seems like a good deal — but there's a key point you will want to recognize. With a PIW, your lender is NOT liable if the assessment winds up being wrong. That's an added benefit for lenders, but affords zero protection to the home buyer whatsoever.

Is there anything that could go wrong?

The information in Fannie Mae's database is derived from past appraisals completed by professional appraisers. it might be accurate to some extent, but it won't necessarily be an up-to-date assessment of the quality of a building that's constantly changing. Without a professional valuation of your home, new improvements, remodels, or damages could certainly be neglected by the system.

Due to these deficiencies, it's easy to 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 sell. You might not be able to get what you paid for it, and you'll have no recourse against your lender when the money starts adding up.

What is the bottom line?

A definitive appraisal typically costs several hundred dollars, but it can save you thousands in the long run. With a Property Inspection Waiver, there is absolutely no guarantee that you're getting an honest valuation of your most expensive asset.

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Buying or refinancing a home is a big decision with big consequences. You demand to know with certainty that you're getting 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 home, nothing is more reliable than the careful examination of a licensed professional you trust.