45% of Fannie Mae’s transactions do NOT require an appraisal.
Even better – almost 70% of rate and term refinances do not require appraisals.
This will be a huge boon for borrowers and the mortgage industry alike – if the long-awaited refi boom surfaces along with the long-awaited rate drop.
It will not be a boon for appraisers, of course, but the total number of appraisers is dwindling so fast that Fannie and Freddie are desperately looking for solutions – and appraisal waivers are just one of them.
Acute Appraiser Shortage Coming Soon!
Right now, there is no shortage of appraisers, but that is only because the mortgage industry is seeing the smallest number of total transactions relative to capacity and population than ever before.
Appraisers are taking it on the chin as well – and that (the cyclicality) is part of the reason so few new appraisers are entering the industry. The other problem includes the very long and onerous training process.
Almost half of appraisers are over 51, and a full 13% of them are over 66. We even have a few on our panel who are in their 80s.
Appraisal Waiver Types and Eligibility
I have blogged about appraisal waivers (Property Inspection Waiver), inspection-based waivers, and hybrid appraisals several times.
Inspection-based waivers require an inspection but no value estimate. Hybrid appraisals require an inspection by an inspector (not by an appraiser) along with a desktop writeup by an appraiser (these save both time and money when coordinated properly).
To be eligible for an appraisal waiver, the property needs to be in Fannie’s or Freddie’s database, the borrowers need to be relatively strong (large down payments are very likely to elicit a waiver), and the purchase price or estimated value (if a refinance) needs to be under $1 million.
And this is why we do not see more appraisal waivers in coastal California, as purchase prices often exceed $1 million.
NOTE: Jumbo and Non-QM transactions never get appraisal waivers.
What Every Agent Should Tell Buyers in a Multiple-Offer Situation
We had a borrower receive an appraisal waiver recently, but she requested an appraisal anyway to make sure she was “not overpaying.”
She was in a multiple-offer situation though, so it was another excellent example of where “the appraised value does not equal market value.”
Once again – the multiple offers on the property are a far better indication of the “market value” than the closed comparable sales (that appraisers must correlate to) ever could be.
Appraisers unfortunately cannot correlate to offers.
So, every time buyers are in a multiple-offer situation, agents need to explain that appraised values often do not equal market values – a dead horse I am going to beat again and again.
