If you are buying or refinancing a home, your lender may give you the option to use a Property Inspection Waiver (PIW) on your application. The program, introduced by Fannie Mae in 2017, allows you to be approved for a mortgage without getting an appraisal at all. It's a relatively new concept, and some lenders love it. But what drove the change, and what risks are there for you as a home buyer?
Basically, the task of deciding what your home is worth falls into the hands of your lender. They determine the value automatically on a computer, employing a database from Fannie Mae instead of hiring a local appraiser to personally inspect the home you're getting ready to buy. So, rather than a manual evaluation, lenders rely entirely on computer algorithms to sort through an array of previously collected information.
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The program is limited right now, but it is including more transaction types continuously. Your home has to have records 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.
The waiver removes appraisal expenses, and it can substantially shorten closing time for buyers. On the surface, this process sounds like a good deal — but there's an essential point you will want to keep in mind. With a PIW, your lender is NOT held responsible if the assessment turns out to be wrong. That's an added bonus for lenders, but a disadvantage to the home buyer.
The information in Fannie Mae's database is pulled from previous appraisals completed by professional appraisers. This data might be accurate to some extent, but it won't necessarily be a current evaluation of the quality of a building that's constantly changing. Without a professional valuation of your home, new improvements and/or damages can easily be left out by the system.
Due to these deficiencies, it's easy to imagine a situation where your property is valued too high by the program assessing it. If that happens, you could run into issues 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.
A definitive appraisal usually costs a few hundred dollars, but it can save you a substantial amount more in the long run. With a PIW, there's simply no guarantee that you're receiving an honest valuation of your most expensive asset.
SCV Appraisal Service can help.
Buying or refinancing a house is a big decision with big consequences. You want to know with certainty that you're getting a fair deal, and working with a licensed appraiser is the smartest action you can take. 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.
The procedure appraisers use to make market adjustments for a perceived difference in comparable properties in a set of sales is obviously called an adjustment. However, the process is called paired sales analysis and is often not fully understood by those surrounding the appraisal industry.
As much as I would like to share a chart that the appraisal industry has agreed upon as standard numeric values for adjustments made to comparable sales for differences in property features, it just does not exist. Only through an analysis of a specific set of comparable sales and the driving factors of determining agreed upon sale prices can you begin to understand value differences between those sales. The process for making adjustments has to match as closely as possible the process those buyers and sellers go through when agreeing on a sales price for a specific piece of real estate. This process varies dramatically from market to market as well as different price points within those markets and is dependent on market conditions, inventory levels and buyer and seller motivations.
The principle of paired sales analysis states in its simplest form that if two sales are identical with the exception of one feature that the difference in price must be attributed to that feature. However, in residential real estate much like one sale does not set values for a market, one market adjustment does not necessarily set value for that feature. The concept of paired sales is most accurate when performed over a set of multiple sales in a manner that best reflects the actions of buyers and sellers in that set. We must realize that buyers and sellers do not operate this way and in the end we are not attempting to value these features but rather the real estate as a whole and these adjustments allow the appraiser to apply a weighted reconciliation to a value conclusion based on the adjusted set of sales.
This is not to say that the answer to the question, what type of return will the installation of a pool bring when I resell, is unattainable. It is just that other questions will need to be answered as well. When do you plan on selling? What will the market look like when you sell? Who is the perspective buyer you plan to sell to, investor, owner occupant? The answers to these types of questions are market, neighborhood, and tract and may even be street specific. That is why it is important when dealing with a real estate valuation issue you seek a local expert.
When doing FHA appraisals HUD has established a set on minimum property standards with regard to the property condition and health and safety issues in and around the property that the appraiser is asked to confirm at the inspection. Most of these issues do not present a problem for those involved in the transaction as most of the homes sold in our Valley are in good condition and generally do not present problems for FHA/HUD in meeting FHA minimum property standards. Occasionally I run across a home that to the untrained eye may appear adequate for FHA but something minor that may have been overlooked by the realtors or the home owners and may delay the loan and require repair.
These items that I’m pointing out are the small issues that will delay the loan and with a little bit of forethought, knowledge and planning these delays can be avoided.
1. Utilities not on during inspection. All the utilities need to be on and operational when the appraiser goes out to do the inspection. FHA requires appraisers to turn on appliances when safe to do so and verify that they are operational. This includes: heating/cooling systems, range, dishwashers, lighting, plumbing items such as faucets and toilets.
2. Missing appliances. As an example: If there is a space for a dishwasher, then HUD requires it and must be operational.
3. Exposed or uncapped wiring. This is a safety issue for FHA and if there is dangling wiring, it needs to be capped and not exposed.
4. Excessive debris in or around the property that may be toxic or prevent access.
5. Chipped and or peeling paint in homes built prior to 1978.
6. Missing Carbon Monoxide detectors or smoke alarms. This is a common issue in the last year and I see many Realtors carrying them in their cars, that is good but remember one needs to installed servicing each sleeping area. If there are bedrooms on both sides of the house, one needs to be installed in each area.
7. Attic space clearance. The appraiser will need to a head and shoulder inspection of the attic space. Please make sure there is adequate access to both the attic and crawl space if there is a crawl space. I have seen attic spaces painted shut or access impossible due to furniture, debris and those stackable storage containers. Inability to gain access will be conditioned and delay the loan.
8. Standing water against the foundation of the home.
9. Unstrapped water heater. I don’t see this much anymore but it’s worth verifying before the appraiser comes out.
10. Broken Glass. Be it a window or shower door, if it’s broken with exposed edges it will need to be repaired.
The top questions to ask your REALTOR®
There is no shortage of qualified agents to help you sell your home. Here are some things to think about while choosing one — and questions to ask the finalists.
Don't be shy about asking tough but fair questions when looking to hire a real estate agent. You're trusting them with your largest asset!
We have much more real estate information and advice available at our website. Visit today and keep us in mind if we can ever serve your appraisal needs.
Anthony J Barrett Southland Appraisal Service
By Brynn Galindo, KGET.com May 23, 2007
New numbers on home foreclosures in the metropolitan Bakersfield area, and they’re up—way up.
We checked with the people who publish legal notices and they said there’s been an alarming spike in notices of default and trustee sales.
These numbers are provided to us by Ann Marino, owner of the Daily Report.
There were just over 2,400 notices of default on home mortgages in Bakersfield during the last five-and-a-half months—a nearly 300 percent increase over the same period last year.
There were 1,140 notices of trustees sales from January through May of this year, compared to just 281 during the same period last year.