There are a few processes that are typically carried out during a home sale, but may be waived in certain situations depending on the needs of both buyers and sellers. A good example here is the home appraisal, or third party valuation of the home -- this is almost always part of the home purchase process, but there may be some unique situations where the appraisal is actually waived.
At Integrity First Lending, we're happy to assist with a wide variety of mortgage loan and related services, including those for first-time homebuyers who haven't been through this process before. What is an appraisal waiver, why might it be considered, and what are the risks involved here? Let's take a look.
As the name indicates, an appraisal waiver is simply an agreement between buyer and seller to forgo the appraiser's valuation of the home. In cases where the sale price is already agreed upon, and both parties are confident in that number, this can save time and money.
The appraisal process itself can take a week or more, and costs around $400-$500 -- so it's not a small expense, especially if you're also paying for other inspections and repairs as part of the home buying process. In cases where everyone is confident in the sale price, an appraisal waiver can streamline things considerably.
It's important to note that not all buyers, sellers and even properties are qualified for appraisal waivers. Borrowers, for instance, must have strong credit scores and a solid history of making on-time payments in order to qualify. Additionally, the property must be a single-family home that isn't considered "high risk" -- so things like investment properties or vacation homes may not qualify.
And finally, there are some loan types that simply don't allow for appraisal waivers no matter what. For instance, FHA loans almost always require an appraisal, as do loans involving certain types of down payment assistance.
While appraisal waivers can save time and money in the right situation, it's important to be aware of the risks involved as well. In some cases, properties may sell for far less than anticipated, leaving the buyer on the hook for any difference between the agreed-upon price and the actual appraised value.
Additionally, there's always the possibility that a property has hidden damage or other issues that an appraisal would have uncovered -- but without one, these risks are simply unknown. For this reason, it's almost always recommended that buyers get some form of home inspection even if an appraisal is waived.
Whether or not an appraisal waiver makes sense for your situation depends on a number of factors, but our team at Integrity First Lending can help you weigh the pros and cons and make the best decision for your needs. Contact us today to learn more!
Equal Housing Lender. Integrity First Lending.
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