Inspections and appraisals are important parts of the real estate process. In many cases, they are simply taken for granted; if you’re going to sell a home, you have to have an inspection.
However, it is possible to have a complete real estate transaction, with a loan backed by Fannie Mae, without an inspection. But you’ll need to have a Property Inspection Waiver, which are only given out in specific situations.
Fannie Mae’s PIW Guidelines
What is the Property Inspection Waiver?
This is essentially an offer to waive the appraisal on a property sale, but it is only available for specific transactions. (More on eligibility below.) Offers with a property inspection waiver, or “PIW,” are created and issued through the Desktop Underwriter program and use the Fannie Mae database, which has over 26 million appraisal reports, as well as analytics from Collateral Underwriter. Using these programs, a lender can determine the minimum level of property valuation required for the loan.
There is no charge for using the PIW option, and since the beginning of 2017, there have been no fees that come with using the PIW.
How to Get a PIW
First, the DU loan casefile will receives a PIW offer and it is then exercised by the lender. Fannie Mae then accepts the value estimate presented by the lender and registers this as the market value for the property in question. They then provide relief from enforcement of representations and warranties on the value and condition of the property.
During the process, the lender will have to represent and warrant the data that is submitted to the DU program. They will essentially certify that it is complete and accurate. If for any reason the lender feels the value should be confirmed, they are required to order an appraisal, effectively canceling the PIW. As an example, properties in an area that has experienced recent disaster will need to have an appraisal, as there could be damage to the property or household that has not been disclosed.
It should be remembered that the majority of properties will not receive a PIW, meaning they will require an appraisal by a trained professional. This will establish the market value and provide greater consistency transitioning into the sales process.
Why Use a Waiver?
So what’s the purpose of all this? Why would anyone actually want to skip the appraisal, which is an important phase of all real estate transactions? There are a few benefits that might motivate someone to skip the appraisal.
First of all, it can make the entire process more efficient. While appraisals are certainly not the most time-consuming phase of real estate, they can hold up the process. Scheduling and waiting for the appraisal can extend the loan origination processes, so if you are looking to sell quickly, you might seek a PIW.
Using a PIW offer also relieves the lender from enforcement of representations and warranties on the value and condition, as well as the marketability, of the property.
It can also reduce costs. By using a PIW, which has no fees or other expenses, you avoid the cost of an appraisal and eliminate expenses that can be connected to delays in the process.
Properties that are Eligible for PIW
While not every property is available for a PIW, many are. Understanding which properties will be considered is important when you start the process. Only certain properties will be eligible for the program, so you need to take a close look at your home (or the home you are buying) before you know if it will qualify for a PIW. First of all, it must be a one-unit property, which can include condominiums. Limited cash-out refinance transactions are considered, but it must be a principle residence or second home with up to 90% loan-to-value or an investment property with up to 75% loan-to-value.
For cash-out refinance transactions, it must be a principle residence with up to 90% loan-to-value or second homes and investment property with up to 60% loan-to-value.
Purchase transactions are also available for waiving the property inspection, but can only be primary or secondary homes (no investment property) with up to 80% loan-to-value.
Transactions that are Ineligible for a PIW
First and foremost, properties in a disaster-impacted area are completely ineligible for a property inspection waiver. There is simply too much risk and too many unknowns for these properties to not have a thorough inspection before a sale. Construction and construction-to-permanent loans are ineligible for the waiver, and any property with more than one unit will also require an inspection. Multi-unit dwellings have more people living in the building, so there is simply too much risk to not have an inspection.
Loan casefiles that have a value greater of $1 million or more are ineligible for the waiver, and renovation and energy-focused mortgage products will also need an inspection. Any leasehold property, community land, or properties with any kind of resale restriction will also need a thorough inspection. Manufactured homes, cooperative units, and any loan that requires rental income to qualify (in other words, without the rental income, the mortgage can’t be paid) will also need an inspection. It might seem obvious, but if the mortgage insurance provider requests an inspection, no matter what type of property, an inspection will be needed.
Lender May Still Request Appraisal
Even if the seller, buyer, and property all lineup, there can still be a situation where the lender will be required to have an appraisal or inspection. In fact, if the lender simply has reason to believe that work should be done on the property, he or she can request an appraisal. There are also unique situations when the lender is required by law to have an appraisal.
Purchase Transactions are Available for PIW
PIW’s are now available for some purchase transactions, so if you are interested, please contact the team at San Diego Purchase Loans today.
We’ll guide you through the entire process to help you understand how you can make the real-estate process more efficient by waiving the inspection.
