Buying a home can be an exciting yet tense time. Whether you’re buying your first home or moving up to a new one, you might still feel overwhelmed with browsing through listings, working with a mortgage lender, and closing the purchase.
With several processes, you might try to find a way to streamline the house purchase. One way you can simplify buying a house is to consider an appraisal waiver or property inspection waiver.
What is an Appraisal Waiver?
An appraisal waiver means you waive your right to have the property examined by an appraiser. During the home buying process, the buyer or seller schedules an appraiser to inspect the home and determine its value.
The first and most obvious benefit of an appraisal waiver is cost savings. The buyer usually has to shoulder the appraisal costs, which might be several hundred dollars you would have used in down payment.
Having an appraisal waived also saves time. An appraisal waiver saves you the time spent scheduling the appraiser, working around the seller’s schedule, and waiting for the results.
Am I Qualified for an Appraisal Waiver?
Fannie Mae’s requirements for appraisal waivers are currently limited to specific transaction types. As of 2019, those eligible for an exemption include:
- One-unit properties, including condominiums
- Principal residences, second homes, and investment properties for the following transactions:
- Cash-out refinancing
- Purchase transactions
- Loan case files that received an Approval or Eligible recommendation
- Properties in high-needs rural areas, as identified by the Federal Housing Finance Agency
Eligible transactions have a maximum loan-to-value or combined loan-to-value ratio. Make sure to check with your lender if your financing option will qualify.
On the other hand, these transactions are ineligible for an appraisal waiver:
- Two- to four-unit properties
- Cooperative units
- Manufactured homes
- Properties with resale restrictions
- Loans in which the mortgage insurance provider requires an appraisal
- Properties in disaster-impacted areas.
Also, Fannie Mae states that homes being sold to family members are ineligible for an appraisal waiver.
What Happens if I Waive the Appraisal?
An appraisal waiver tells the lender that you will accept the value stated in the application. When you waive an appraisal, the task falls into the hands of your lender to determine the worth of the property. They’ll use Fannie Mae’s online database, look for similar homes in the location, and come up with a value.
Although the information in Fannie Mac’s database stems from data from professional databases, it may not be updated. The system might also fail to see recent damages or improvements that affect the value of the property.
When this scenario happens, you could end up overpaying your home. However, once you’ve waived an appraisal, you can’t hold the lender or seller liable for the incorrect values. If the value of the home is lower than the purchase price, you’ll end up with negative home equity.
Getting an appraisal waiver may sound like a bargain. You’ll save money, and you’ll get the home you want more quickly. However, an appraisal waiver has its consequences. Even if it’s worth money and time, working with a licensed appraiser gives you peace of mind that you’re receiving a fair deal.