Creative approaches to home appraisal in the COVID19 era

“When the home price is less than $1 million, home buyers should ask their loan officers about the possibility of an appraisal waiver, unless the home buyer wants this document for any property insights it may provide. Such insights are sometimes wanted as a basis for negotiation of offer terms.

Loan officer: John Holmgren, Holmgren & Associates/Finance of America Mortgage.

Property type: Single family home in Novato.

Purchase price: $940,000.

Loan amount: $705,000.

Financing terms: 30 year fixedrate mortgage at 3.375% with no points.

Background: The pandemic has led to an evolution in how the real estate and mortgage industries conduct business. Virtual and private home tours are the rule for open houses. In the area of home appraisal, a number of approaches are being used.

In this transaction, we were able to get a Property Inspection Waiver (PIW), in which an appraisal isn’t required. This can happen when the current loan on the property is owned by the mortgage agencies Fannie Mae or Freddie Mac. The buyer’s loan is going to be placed with one of those agencies and, usually, when the property value is less than $1 million.

There are pluses and minuses to an appraisal waiver. Sometimes home buyers actually want a formal appraisal done in order to validate their purchase price. On the other hand, not having to do an appraisal saves time and the cost of an appraisal (now usually $500 or more), and avoids having to address potential defects that are evident when an interior property inspection is done.

When the loan is not going to be sold to one of the mortgage agencies, it may be because it is a jumbo loan amount or the loan is being made by a bank or other depository institution that may or may not sell the loan. In this case, a number of approaches are used, including traditional appraisal inspections, driveby appraisals and hybrid arrangements — typically used when the current homeowner is at high risk for the virus, in which, appraiser access to the property is limited as much as possible

When the home price is less than $1 million, home buyers should ask their loan officers about the possibility of an appraisal waiver, unless the home buyer wants this document for any property insights it may provide. Such insights are sometimes wanted as a basis for negotiation of offer terms.

The prediction of virusrelated disruption in the loan process has largely failed to materialize thanks to creative approaches to the appraisal and other steps on the road to loan approval.