Appraisal Not Required? Maybe Not! Find Out Before You Place an Offer to Buy a Home!
Created On April 7, 2022 - Updated On: April 19th, 2022 by Stephanie Jones
You can always remove an appraisal contingency from your purchase offer, but did you know that the appraisal itself may not be a lender requirement for mortgage financing (it’s called a property appraisal inspection waiver or PIW)? This can be determined upfront through our pre-approval process well before you put in your offer to purchase. This also means the escrow period can be shorter, as the appraisal takes up considerable processing time – closing in just a couple weeks becomes doable (or less). This shorter escrow period and no appraisal contingency could put your offer to the top of the list!
How is PIW achieved?
A property appraisal inspection waiver is issued only in conventional conforming financing. So, loan amounts $970,800 or less (depending on your county – you can check county loan limits here). Fannie Mae & Freddie Mac are the entities that issue the waiver, it is determined by their internal automated underwriting system (essentially a computer program), that crunches the numbers on that loan file, including debt to income ratios, value, down payment amount, loan program, rate, and most importantly the property address. If either Fannie or Freddie determine the value of the home entered is acceptable, they will state no appraisal is needed to verify the value. If they are confident in that scenario to waive the requirement, they will issue a PIW, and it then becomes possible for you to waive your appraisal contingency without a concern on the appraised value negatively effecting the transaction!
PIW’s happen quite frequently in the recent past, mostly on refinances, but you would be surprised how many we have seen on purchase transactions too. The more the down payment, the higher likelihood an appraisal waiver will come up on a given property (more equity = less risk). Same goes with other loan parameters: higher credit score, lower debt to income ratios, all of these play a part in whether a property appraisal inspection waiver is offered. Now, we won’t ever know exactly why it was not available (the system does not reveal that), it is the specific combination of factors that determine if the waiver is available.
Note, PIW, as it is not available under these circumstances:
- Home value over $1,000,000.
- 2-4 unit properties
- Manufactured homes
- Rental income from the subject property being used to qualify (investment transaction)
- An appraisal has already been obtained, establishing value
- Non-arm’s length transaction (between friends and family)
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