What Is an Appraisal Waiver?

Definition

An appraisal waiver is an offer to forgo an appraisal for an eligible real estate transaction. The home appraisal being waived helps ensure that the property’s value matches its list price.

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Definition and Examples of Appraisal Waivers

When purchasing or refinancing a property, banks often will require that a home appraisal is completed before the transaction is closed. This is because banks take on a risk when they lend you money; they want to be sure the value of your property matches the amount of money that they’re lending, in the event you default on your payments.

Key Takeaways

  • Home appraisals are used to determine the value of a property.
  • When purchasing a home, the home appraisal ensures that the purchase price accurately reflects the value of a home.
  • When refinancing, a home appraisal will be used to ensure that the home’s loan-to-value ratio is not exceeded.
  • If used, an appraisal waiver will override the requirement for a home appraisal.

When purchasing a property with a mortgage, you’ll need to have an appraisal completed before escrow can close and the keys can be exchanged.

If you’re refinancing, banks will likely want an appraisal done before they allow you to withdraw any cash, although there are some properties and circumstances that make it possible to waive an appraisal when refinancing.

Note

You may face issues when buying a home if the appraisal falls below the purchase price. In this case, the lender may need you to put down additional funds to close the gap.

An appraisal waiver is just as it sounds—a decision to waive or forgo the home appraisal for your transaction. As a buyer in a hot real estate market, you may be tempted to waive the home appraisal to make your offer look appealing to the seller.

In the case of refinancing, the bank may opt to skip a home appraisal for a few reasons. For example, if you’re refinancing simply to change the rate or term of the loan and don’t intend to withdraw equity, the bank may opt to waive the appraisal.

In addition, a lender may waive the requirement for a refinance appraisal if you have a Federal Housing Administration (FHA), Department of Veterans Affairs (VA), or U.S. Department of Agriculture (USDA) loan.

How Appraisal Waivers Work

Let’s say you purchased a home 10 years ago. It was your first property and your credit was good, but not excellent, due to some credit card debt you’d acquired. Since then, you’ve paid off that debt, making your score jump by more than 100 points.

Interest rates for home mortgages also dropped from the time you bought, so you began looking into refinancing. You don’t want to pull out any of the equity that has accrued; you’re simply looking to lower your rate.

After a phone call with your mortgage lender, they agree that no-cash-out refinancing could be a good option for you. They also agree to waive the home appraisal because your current loan-to-value (LTV) ratio is lower than their threshold of 90%.

What It Means for You as a Homebuyer

There are two distinct times when you’ll encounter an appraisal waiver. As mentioned, one occurs when you are able to coordinate with your bank during refinancing to have the home appraisal requirement waived.

You also may choose to opt for an appraisal waiver when you seek to put in an offer on a house. As mentioned, a home appraisal helps determine the risk that the bank is taking on when granting you a mortgage.

Note

If you’re relying on a mortgage to buy a home, your lender likely won’t allow you to skip the appraisal.

However, if you’re funding the purchase of the property—say, with an all-cash offer—you have the ability to waive as many contingencies as you like. This includes a home appraisal waiver, as well as a home inspection waiver. This can be an especially powerful tool to wield when the market is hot, as it can make your offer stand out.

Beware, however, of the danger of waiving a home appraisal when purchasing a property. Without having one completed, you won’t know the true value of the house you’re purchasing, and you may end up underwater as soon as escrow closes.

Note

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. “What Are Appraisals and Why Do I Need To Look at Them?

  2. Fannie Mae. “Appraisal Waivers - Frequently Asked Questions,” Page 1.

  3. Rocket Mortgage. “Do You Need An Appraisal When Refinancing?

  4. Discover. “Loan-to-Value & Equity: How Much Do You Need To Refinance?

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