Appraisal Waiver is a term frequently discussed in Baird & Warner office meetings. The conversations surrounding this term vary because the term means something different in finance than it does in sales. We’re here to break down the differences for you.
Appraisal Waiver in Sales
With home prices rising, buyer’s agents are getting more creative when submitting offers to ensure their clients get the home they want. One technique is an appraisal waiver. In this context, it means that if the home is appraised less than the offered amount, the buyer agrees to pay the difference. This can be written into the purchase agreement to offer the seller an assurance that the property will sell — regardless of appraisal.
An appraisal waiver in this capacity may still impact financing. Part of the Key Mortgage consultative pre-purchase process is to explore options with prospective buyers. Key helps consider what strategies can be used to help offset the difference between an appraisal and home price and still be able to purchase the home with terms they are comfortable with. This helps buyers have less anxiety over the appraisal process, which leads to less frantic calls to you and a much happier client (and agent)!
Appraisal Waiver in Finance
When a Key Mortgage loan officer informs their client that the loan structure qualifies for an appraisal waiver, it means there is no in-person appraiser visit. Instead, data collected by Fannie Mae and Freddie Mac on comparable sales over several years is used to compare that data to the sales price entered and will notify us if the value as entered is accepted.
Not all buyers or properties qualify for an appraisal waiver. The appraisal waiver is determined by Fannie Mae’s desktop originator or Freddie Mac’s Loan Prospector tools and determined while in underwriting. The property must be a one-unit property, and the buyer must meet credit, downpayment and asset requirements.
For more information on how an automated underwriting appraisal works, or other strategies we can use to offset a low appraisal, reach out to a Key Mortgage loan officer.