If you want to purchase a home in a red-hot market, you need to give yourself every possible advantage. You can only bid so high, so using strategies that make your offer more attractive without a higher price could be useful. An appraisal waiver is one possible strategy.
By getting an appraisal waiver from your mortgage lender, you could gain a competitive edge in the market without increasing your purchase price.
The Appraisal Waiver Could Help You Stay Competitive
Why are Appraisals (Usually) Required
Appraisals are one of the most common, and time-consuming, parts of the buying process. An appraisal is simply a statement of estimated value on the property. Conducted and completed by trained professionals, property appraisals reviews the quality of the home, size, bedroom count, bathrooms, features, lot size, and hundreds of other factors to reach a conclusion on the value.
Appraisals are generally required by the lender. Essentially, the lender will be using the property as collateral against the loan. If the loan goes into foreclosure (which is extremely rare) the lender will seize the property and sell it at auction. To reduce their financial risk, they want to make sure that the loan they are issuing is comparable to the potential sales price of the property. Therefore, they order an appraisal.
How Long Do Appraisal Take?
The appraisal itself only takes about one to three hours for most homes. Larger homes, with more details and complexities, can obviously take much longer. But the time it takes for an appraiser to go through the home in only a small portion of the total appraisal time.
First, an appraisal needs to be ordered and scheduled by the lender. Depending on the appraisers schedule, it could be a week or more before the appraisal is complete. Once the appraiser visits the property, they need to find comparable properties, calculate all the various factors, and reach a final number. This can add another week or more to the process.
In total, from ordering the appraisal to finally sending the appraisal documents to the lender, the appraisal process can take as much as a month. Usually it will take somewhere between one to two weeks, but in a busy market with numerous sales, it’s not uncommon for an appraisal to take longer.
The Current Market: Fast Sales, Rising Prices
Real estate is a regional and local industry. The market in one city may be completely different from the market in a town just a few miles down the highway. That said, there are some clear trends in today’s marketplace. Namely, high prices and rapid sales.
Property prices are increasing, which is nothing new. However, the rate at which they are growing, especially in suburban areas near major metropolitan cities, is increasing rapidly. Prices in San Diego County, for example, have increased to an average of $775,000, according to Redfin. This is a 17.4% increase in the past year alone! All of this has occurred despite a drop in total number of homes sold.
Buyers also see fast sales. Median days on the market for homes in San Diego County is around 13, which is actually up from a low of only 9 days in the early summer of 2021.
Again, these are the numbers for just a single market, but they reflect the overall trends seen in areas all across the country. It’s hard to buy a home right now, but an appraisal waiver could give you a competitive edge.
Waiving the Appraisal Helps you Stay Competitive
Sellers know an appraisal can take time. They know that a purchase offer with an appraisal will take time to complete, so they often give greater attention to an offer with no appraisal requirement. An appraisal waiver, therefore, could be perfect for your next home purchase.
An appraisal waiver shortens the sales process, allowing the purchase to go from offer to acceptance to closing in a shorter amount of time. As a seller, this seems highly beneficial.
At its core, there are two things that motivate sellers. The first is offer amount. Obviously sellers are interested in getting the most money possible for their house. The second motivation is time. Sellers want to sell the house as fast as possible so they can get their money and move on. Some sellers are so motivated to sell quickly that they may take a smaller offer (within reason) if that offer also helps them move the property with greater speed.
When Would a Lender Agree to Waive the Appraisal Requirement?
There is a challenge to this issue, however. Lenders are really under no obligation to grant an appraisal waiver. All things the same, there are few benefits to skipping the appraisal, at least from the lender’s perspective. However, there are a few situations where they will grant this waiver. In some ways, it can actually be beneficial not just to the buyer and seller, but to the lender as well.
In certain situations, the lender will grant an appraisal waiver because the appraisal is simply not needed. This usually happens when the home has been appraised in the recent past. For example, the home may have been purchased just a year or two before; if there has been little to no changes to the overall market, it’s entirely possible that the lender can use the recent appraisal because the value of the home was calculated so recently.
Waiving an appraisal enhances efficiency, which can be beneficial to the lender as well. Waiving the appraisal can make the total underwriting process faster and more efficient, allowing the deal to be closed quicker. Like any professional in any industry, if a lender can move from one task to another, without sacrificing quality, they’ll do so. With credit checks, income verification, debt reviews, and a myriad of other information, a lender may be comfortable issuing a loan even if there was no appraisal on the home.
Add an Appraisal Waiver to Your Next Purchase Offer!
Contact our team today to learn more about the benefits of an appraisal waiver. With a dedication to service and support, we’ll help you find the right mortgage to increase your competitiveness in a red-hot sales market.
