APPRAISAL WAIVERS – FEW AND FAR BETWEEN
Appraisal Waivers or “Property Inspection Waivers” (or PIWs) are popping up more often nowadays.
This is a good thing b/c they speed up transactions and save borrowers $500 or more.
BUT – they are not surfacing so often that we have reason to celebrate.
Some lenders are actually marketing appraisal waivers as if they are a gift they offer to buyers based on their own discretion.
But – that is misleading, as appraisal waivers are granted solely by Fannie’s and Freddie’s algorithms and automated underwriting findings.
In 2016, Fannie Mae started to offer appraisal waivers with refinances.
Then by September of last year (2017), both Fannie and Freddie were offering appraisal waivers for purchases too.
There are a lot of requirements before appraisal waivers are allowed, and this is why lenders get them so infrequently.
1. No appraisal waiver will be granted unless a prior appraisal for the subject property can be found in Fannie’s and Freddie’s databases.
2. The prior appraisal must have a “low CU” score (or no “overvaluation flag”), and it must be over 120 days old.
1. For refinances to get an appraisal waiver, the borrower must be in the Fannie/Freddie databases. This is not the case for purchases.
1. Purchases up to 80% LTV for most primary residences.
2. Refinances up to 90% LTV, for most primary residences.
3. Refinances up to 75% LTV for investment properties.
1. Borrowers must be very clean and strong from an underwriting perspective before appraisal waivers are granted.
2. Former appraisals and borrowers (for refinances) must be in Fannie/Freddie databases already (as mentioned above)
3. THIS IS THE MAJOR ONE: Appraisal waivers sometimes disappear at the 11th hour if income, credit or borrower’s income changes. We have seen several instances where income changes from the time of pre-approval to contract time, and the income changes knocked us out of appraisal waiver range b/c the algorithm requirements are so tight.
Final Point: Eventually, as the Fannie/Freddie databases get fuller and fuller of past appraisals and borrowers alike (and as long as markets remain somewhat stable), we will see more and more appraisal waivers.
But right now, borrowers should not hold their breath.
Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646