Don't risk your investment with a Property Inspection Waiver

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 loan application. The PIW program, initiated by Fannie Mae in 2017, allows you to be approved for a mortgage without an appraisal at all. It's a newer concept, and some lenders love it. But what determined the change, and what risks are there for you as a home buyer?

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How do Property Inspection Waivers work?

Essentially, determining what your house is worth falls into the hands of your lender. They determine the value automatically on a computer, employing 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 processes to sort through a pile of previously collected data.

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Who can receive a PIW?

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

Why is it used?

The waiver removes appraisal fees, and it can trim closing time substantially for buyers. Outwardly, this streamlined process seems like a good deal — but there's a bottom line you'll want to consider. With a PIW, your lender is NOT held responsible if the valuation winds up being wrong. That's great for lenders but affords no protection to the home buyer.

What could happen if I accept a Property Inspection Waiver?

The information in Fannie Mae's database is pulled from previous appraisal reports completed by professional appraisers. This data might be accurate to some extent, but by definition, it will not be an up-to-date assessment of the quality of a building that changes over time. Without a professional appraisal of your home, recent improvements, renovations, or damages can easily be omitted from the system.

Because of these shortcomings, it's easy to imagine a situation where your property is priced too high by the computer 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 falls short.

What is the bottom line?

An accurate appraisal typically costs a few hundred dollars, but it can save you thousands in the future. With a Property Inspection Waiver, there is no guarantee you're getting an honest valuation of your most expensive asset.

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Buying or refinancing a property is a big decision with grand consequences. You demand to know with certainty that you're receiving a fair deal, and working with a licensed appraiser is the smartest move you can make. Computers and algorithms have assumed a place 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 assessment of a licensed professional you trust.

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