Is a Property Inspection Waiver worth the risk?If you are buying or refinancing a home, your lender may give you the option to use a Property Inspection Waiver – or PIW – on your application. The waiver program, introduced by Fannie Mae in 2017, allows you to move forward with your mortgage without needing an appraisal. It's a relatively new concept, and some lenders love it. But what prompted the change, and what are the risks for you as a home buyer? 
How do PIWs work?Basically, the task of deciding how much your house is worth falls into the hands of your lender. They determine its value automatically on a computer, using a database from Fannie Mae rather than hiring a local appraiser to inspect the property you're getting ready to buy. So, rather than a firsthand evaluation, lenders rely on computer methods to sort through an array of previously collected data. Get your appraisal from Melville Appraisal today Get a quote onlineWho can receive a PIW?The program is currently limited, but it's being expanded regularly to include more types of transactions. Your property needs to have records in Fannie Mae's electronic database, so homes that have never been appraised are not eligible for a PIW. Additionally, you need to have an excellent credit score and high assets for approval. Why do lenders use PIWs?The waiver eliminates appraisal fees, and it can cut closing time considerably for buyers. On the surface, this process sounds like a good deal — but there's a bottom line you will want to recognize. With a PIW, your lender is NOT liable if the valuation is wrong. That's a bonus for lenders, but awful for the home buyer. What could go wrong if I accept a PIW?The information in Fannie Mae's database is pulled from past appraisals done by professional appraisers. This data might be accurate to a degree, but it won't necessarily be an up-to-date assessment of the exterior and interior quality in a building that changes over time. Without a professional appraisal of your home, recent improvements, renovations, or damages could easily be missed by the system. Due to these shortcomings, you can imagine a scenario where your home is priced too high by the program assessing it. If that happens, you could run into problems when it's time to put it back on the market. You may not be able to receive 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?An accurate appraisal usually costs a few hundred dollars, but it could save you thousands in the long run. With a PIW, there is no guarantee you're receiving an honest valuation of your most expensive asset. Melville Appraisal can help. Buying or refinancing a property is a big decision with big consequences. You need to know without a doubt that you're receiving a fair deal, and working with a licensed appraiser is the safest action you can take. Computers and algorithms have assumed a place in nearly 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. |