What Is An Appraisal Waiver Or Property Inspection Waiver?

Appraisal and Property Wavier

This week I want to discuss appraisal waivers, which are also called property inspection waivers. I’ll talk a little bit more about what they are, how you get one if you’re looking to buy a home or refinance, and then also, why are we seeing more appraisal waivers right now? And what are some potential dangers on the appraisal waiver?

First of all, what is an appraisal waiver, the property inspection waiver?

This means that on every application that we take, we have to run your application through a computer underwriting system. The underwriting system tells us a lot of things like whether or not your loan is approved. Then also another thing that it tells us is whether or not we need a full appraisal, or if we could get an appraisal waiver.

The computer gives us a result that we can have a property inspection waiver, then that means that we can go down that path.

We don’t have to, we can still get a full appraisal if you want to. But that means that we have the option of getting a property inspection waiver.

Under what circumstances did we get these results? First of all, this is only on conventional loan. Fannie Mae, Freddie Mac loans, this is not on FHA, VA or USDA loans. On those types of loans you must be doing what’s called a streamline refinance. You have to get an appraisal on those types of loans. So this is only conventional loans. And we’re seeing a lot more waiver these days because there’s more and more data out there because of the number of refinances that are going on.

So Fannie Mae and Freddie Mac, what they do is they, the computer is able to analyze data in your immediate area and find homes that are somewhat similar to yours and analyze whether or not the value that we put in the system is reasonable for your home. And if they, if it deems that it is, then we have the option of a waiver. Also, they can look at MLS data. So this means they can look at that and they can, it helps determine whether or not there’s a reasonable likelihood that the home is worth that much. So risk-based model. Also in an environment like right now, we’re home values are increasing so fast, it’s deemed less risky in this type of an environment because of the fact that values are increasing. So we’re more likely to get waivers these days because of that.

What are the risks involved on accepting the appraisal waiver? So on a refinance, not a whole lot of risk. The risk is, is that we have to run your application through the underwriting system, throughout the loan process. This is normal. So we’re going to run it through the computer, three, four, five, six times, something like that. And there’s a chance that the computer may come back with a different result as we work through the process. And then all of a sudden the appraisal is required. So on a refinance, not a super big deal, it just delays us a little bit. But on a purchase, if you’re buying a home and we’re getting closer to closing and all of a sudden we need an appraisal and can’t get that result to be overturned, there’s risk that your closing date may get delayed.

Doesn’t happen very often, but it can happen. So, that’s one of the biggest risks. So as this market continues with home values going up and a lot of demand, a lot of refinancing going on, we’re going to likely keep seeing a lot of appraisal waivers. When the market shifts, which inevitably it will because everything’s cyclical, things ebb and flow, so this market won’t continue forever. It’s likely we’ll get less waivers in that type of environment and home values maybe stabilize or stay even, or maybe even go down a little bit.

So that’s a little bit about property inspection waivers or appraisal waivers. So if you have any questions about your particular situation or anything else loan-related, just give me a call. 303-670-0137.