Some homeowners who are refinancing to take advantage of today’s super low interest rates have gotten a pleasant surprise – an appraisal waiver.
What is that? It’s the opportunity to refinance without going through the inconvenience or expense of a traditional appraisal. In its place, banks are using sophisticated computer programs to determine the market value of homes being refinanced.
Why are they doing this?
For one thing, their software is often just as accurate as an in-person appraisal.
However, the primary reason right now is COVID-19. Lenders are doing all they can to limit face-to-face contact, and waiving the appraisal is one more way to accomplish that distance.
Appraisal waivers are almost exclusively offered to homeowners who are refinancing – and who have a solid track record of making payments on time. They generally aren’t offered on cash-out refinances, so the bank’s risk is relatively low.
In a few cases, appraisal waivers are offered on purchase loans, but only if the borrower has a strong credit rating, plenty of money in the bank, and a solid income.
But – what if the software comes in with a low number? In that case, the homeowner has the right to request a full in-person appraisal.
Meanwhile, an appraisal waiver is like a gift to the homeowner. A standard appraisal costs anywhere from $200 to $750, depending upon the size of the house and where you live. That’s a cost that borrowers pay. There’s no fee when the bank uses their own software.
Thus, getting an appraisal waiver significantly lowers the cost of a refinance, resulting in even greater savings than the homeowner anticipated.