So the “Appraisal Waiver ” in the mortgage industry has undergone a substantial change recently. Sometimes industry changes just leverage technology to make more work for lenders, borrower realtors & attorneys. For example closing packages seem to be three times larger than the ones 25 years ago that needed to get FEDEXed to title companies instead of emailed! However, this one is the opposite and is already making things easier for multiple parties in the real estate transaction. The “Value Acceptance”, in my opinion, is a welcome addition to the mortgage process.
Value Acceptance is the term mortgage loan originators (MLOs) receive in our automated underwriting (AUS) results. It means that the algorithm has accepted the transaction value, usually the contract purchase price, and an appraisal to confirm the value is NOT required to close the loan. This means that both the time and money needed for an appraisal are eliminated. Appraisals are NOT in the control of the lender ans sometimes can take three weeks to be completed. Additionally appraisals have moved from $350 to $600 on average and sometimes as much as $1000 for a single family home! This will increase the speed at which your mortgage approval is completed and bring peace of mind to all in the transaction.
The original appraisal waiver was a product of the crash back in 2008. Folks were upside down and we spent a few years appraising their homes during the HARP refinance era. However, it was really unnecessary as Fannie Mae & Freddie Mac were buying upside down loans. So eventually they rolled out the waiver and stopped making us appraise upside down homes.. Funny thing was, as I recall, at that time they charged $75 bucks to waive the appraisal which seems silly.
Then in 2015 or so the Collateral Underwriter (CU) was rolled out. That tool worked behind the scenes to assess the quality of the comparable properties that an appraiser selected. It ranked the 100 most comparable properties to a subject home and then assessed the ones selected by the appraiser. If the appraiser was low balling, or stretching the value of a property the CU would trigger the human underwriter to ask more questions along the lines of “why didn’t you select the house next door that sold last month for $20K less?”. This helped keep appraisers honest and over time, improved the quality of their work.
Now we have the Value Acceptance. Given the sheer amount of appraisal and property appreciation data that Fannie & Freddie have gathered over the last decade and a half, this advancement is no surprise. The fact is that the appraisal, though paid by the client, has always been a tool to protect the lender and investor in the loan. They want to make sure that a property is worth what is being paid for it and the loan terms are priced correctly. They now have enough data to do this with confidence, in some instances.
For the last few years, when offered an appraisal waiver, only about half of clients took it. The ones that did not want the confirmation of the purchase price and peace of mind they thought and appraisal would bring. But I think that this new tool means most, if not all should take it. The algorithm is now built on the previous versions of the appraisal waiver and if the lender is OK to loan you 50,80, 95% of the value, then you should be likely be OK to make your down payment without needing the value confirmed by an appraisal, which most often comes in at your purchase price anyway.
So save some time, money and stress by rolling with the Value Acceptance if it’s offered in your transaction.
