Appraisal waivers can help expedite the final approval process by eliminating the need for an appraiser to visit the home in person. Instead, lenders use data from an automated underwriting system to support the value of the home. This can be beneficial for borrowers as it is quicker than an in-person appraisal and can save them the cost of the appraisal (typically $500-$700). However, appraisal waivers may not determine value as accurately as an appraiser and borrowers could potentially pay more for the home than it is worth.
Appraisals are beneficial to lenders as it protects them from lending a borrower more than the value of their home, which could result in a greater loss if the borrower were to default on their loan. Whether or not an appraisal waiver can be used is determined by the lender and their automated underwriting system. There are several factors which go into determining if a waiver will be granted or not. In some circumstances, the home may have been sold recently and the market value was determined at that point and can still be used to support the requested loan amount. Borrowers must have strong credit and typically need to put 20% down to receive the waiver. The subject property must also be a one-unit property.