Buying Home - Waive Appraisal?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Post Reply
Topic Author
outlierZ
Posts: 48
Joined: Sun Jan 19, 2020 7:56 am

Buying Home - Waive Appraisal?

Post by outlierZ »

We are in the process of buying a home and the agent said we will have a higher chance of getting the home if we waive the appraisal. The houses in the neighbourhood (similar style, sq.ft, etc.) are recently getting sold for 5.5 - 7% higher than the listing price. In that regard, I have following questions:
1. How would you approach this? Advisable, Not advisable?
2. If the buyer's agent put in the contract that the seller will waive appraisal but the house comes back with an appraisal of only 3%, is there a way to handle this situation?

Any other advice or experience around this would be highly appreciated.
grkmec
Posts: 255
Joined: Wed Jun 22, 2016 8:46 am

Re: Buying Home - Waive Appraisal?

Post by grkmec »

Are you paying cash or is financing involved? If a bank is involved, you can wave the appraisal but the the bank won’t. If the appraisal comes back low you will be on the hook for a bigger downpayment.

I would only waive appraisal if I was an expert on the local market and didn’t care about the financing consequences. I also happen to have a very low opinion of appraisers so I don’t put much faith into the products they produce.
Topic Author
outlierZ
Posts: 48
Joined: Sun Jan 19, 2020 7:56 am

Re: Buying Home - Waive Appraisal?

Post by outlierZ »

grkmec wrote: Thu Oct 21, 2021 6:48 am Are you paying cash or is financing involved? If a bank is involved, you can wave the appraisal but the the bank won’t. If the appraisal comes back low you will be on the hook for a bigger downpayment.

I would only waive appraisal if I was an expert on the local market and didn’t care about the financing consequences. I also happen to have a very low opinion of appraisers so I don’t put much faith into the products they produce.
Thank you! We have financing involved.
User avatar
8foot7
Posts: 4427
Joined: Mon Jan 05, 2015 6:29 pm

Re: Buying Home - Waive Appraisal?

Post by 8foot7 »

This is inadvisable. You always want to have options. You would be on the hook for bringing more money to the table if the appraisal came in low and you don't have a contingency.
w5000
Posts: 302
Joined: Mon Feb 10, 2020 8:33 pm

Re: Buying Home - Waive Appraisal?

Post by w5000 »

Instead of completely waiving the mortgage contingency regarding an appraisal, you can also put a limit on it, i.e. as long as the appraisal comes in at at least $X, then we will cough up any additional down payment to get the financing. That would limit the amount you have to come up with for additional down payment.

In many cases, it's nice to have the contingency for the appraisal/mortgage -- if it comes in low, the seller often (?) will lower the price to complete the sale. However, in competitive markets especially when you're competing against cash offers, you need to do something to strengthen your offer, either in terms of contingencies and/or price.
User avatar
jfn111
Posts: 1377
Joined: Fri Nov 08, 2013 9:42 pm
Location: Minnesota

Re: Buying Home - Waive Appraisal?

Post by jfn111 »

If your financing the purchase usually the "waiver" of appraisal is for a certain dollar amount. You are offering to cover a gap of say $10,000.
You are better off with a dollar amount then an open ended waiver. :moneybag

posted at the same time.
J295
Posts: 3401
Joined: Sun Jan 01, 2012 10:40 pm

Re: Buying Home - Waive Appraisal?

Post by J295 »

We are in a hot market here for many homes, and it is not uncommon to have appraisal waived, and in some instances inspections waived. From the buyer side, it boils down to your financial situation and real estate expertise, and willingness to assume risk.

As indicated above, a hybrid is to agree that if the appraisal is lower than the purchase price you make up the difference up to a maximum of $X. Very common here.

So, advisable if you want to increase your chances of your offer being accepted. Not advisable if you are unsophisticated regarding value, not willing to pay more for the home, or the higher appraisal will negatively impact your ability to finance/ pay loan
LawEgr1
Posts: 253
Joined: Tue Dec 27, 2016 9:34 pm

Re: Buying Home - Waive Appraisal?

Post by LawEgr1 »

jfn111 wrote: Thu Oct 21, 2021 7:22 am If your financing the purchase usually the "waiver" of appraisal is for a certain dollar amount. You are offering to cover a gap of say $10,000.
You are better off with a dollar amount then an open ended waiver. :moneybag

posted at the same time.
+1

Just did a similar thing as we moved in this market within the past month. I was extremely uncomfortable with having an open ended amount by just waiving the contingency entirely, so we simply had appraisal gap covered up to $7,500. In our case, there was minimal amount to worry about given our realtor experience and the house. It had an appropriate appraisal amount so there were no additional costs. But, there's always the risk.

Did a similar thing with home inspection. Exact same sentiments. I did not waive it but we said we'd cover any one item up to $XXX. If our realtor notified us someone wasn't doing inspection, we didn't entertain it as we wouldn't remove that contingency and sellers often took those with less contingencies.

It gives a sense of protection on your side but also that the seller feels better about the risk of the sale.

My 2 cents.

Thanks,
LE1
Goal33
Posts: 2004
Joined: Sun Apr 12, 2015 12:30 pm

Re: Buying Home - Waive Appraisal?

Post by Goal33 »

Take the worst comp and see if you can afford the gap.

Both my purchases in my life waived appraisal. Both appraised at purchasing price but it can easily go 10% lower.
User avatar
Bogle7
Posts: 1984
Joined: Fri May 11, 2018 9:33 am
Location: In the Witness Protection Program

Waive Appraisal? - We did

Post by Bogle7 »

We did when we bought our current house in 2011.
I studied the market for months and knew the market value within $10K (or 2%).
Now, for fun, I have a 1200 row spreadsheet of all the houses (sales price, DoM, square footage, WalkScore) built in this century in our neighborhood.
Old fart who does three index stock funds, baby.
User avatar
jfn111
Posts: 1377
Joined: Fri Nov 08, 2013 9:42 pm
Location: Minnesota

Re: Buying Home - Waive Appraisal?

Post by jfn111 »

LawEgr1 wrote: Thu Oct 21, 2021 12:10 pm
jfn111 wrote: Thu Oct 21, 2021 7:22 am If your financing the purchase usually the "waiver" of appraisal is for a certain dollar amount. You are offering to cover a gap of say $10,000.
You are better off with a dollar amount then an open ended waiver. :moneybag

posted at the same time.
+1

Just did a similar thing as we moved in this market within the past month. I was extremely uncomfortable with having an open ended amount by just waiving the contingency entirely, so we simply had appraisal gap covered up to $7,500. In our case, there was minimal amount to worry about given our realtor experience and the house. It had an appropriate appraisal amount so there were no additional costs. But, there's always the risk.

Did a similar thing with home inspection. Exact same sentiments. I did not waive it but we said we'd cover any one item up to $XXX. If our realtor notified us someone wasn't doing inspection, we didn't entertain it as we wouldn't remove that contingency and sellers often took those with less contingencies.

It gives a sense of protection on your side but also that the seller feels better about the risk of the sale.

My 2 cents.

Thanks,
LE1
That's a good idea on the home inspection. The other thing I see is doing a pass/fail inspection rather then waiving the inspection contingency. You will show the seller your not trying to nickel and dime them but have the opportunity to walk if something major is wrong with the house.
squirm
Posts: 4239
Joined: Sat Mar 19, 2011 11:53 am

Re: Buying Home - Waive Appraisal?

Post by squirm »

Some buyers are waiving the appraisal as the difference between contract price and appraisal increases.

I would do my own research, get similar comps and come up with a price I'm willing to pay. But it really depends on how much you want the house. You'll have to make up the difference in cash if the appraisal is less. 3% difference wouldn't be a deal for me. 10-15% might be, but again how bad do you want the house.

Personally i wouldn't waive it, just pay the difference.

You can also suggest to the seller why the house might be worth xyz more and have them rely that to the appraiser, but they are not required to take that into consideration.
User avatar
hand
Posts: 2201
Joined: Sun May 17, 2009 8:42 pm

Re: Buying Home - Waive Appraisal?

Post by hand »

jfn111 wrote: Thu Oct 21, 2021 12:59 pm
That's a good idea on the home inspection. The other thing I see is doing a pass/fail inspection rather then waiving the inspection contingency. You will show the seller your not trying to nickel and dime them but have the opportunity to walk if something major is wrong with the house.
That's a great idea!
wander
Posts: 4424
Joined: Sat Oct 04, 2008 9:10 am

Re: Buying Home - Waive Appraisal?

Post by wander »

8foot7 wrote: Thu Oct 21, 2021 7:07 am This is inadvisable. You always want to have options. You would be on the hook for bringing more money to the table if the appraisal came in low and you don't have a contingency.
+1. The bank will do apraisal with Op's expense anyway. If the appraised value is very low, with contingency, Op can just walk away.
Ani
Posts: 193
Joined: Wed Aug 22, 2018 10:03 pm

Re: Buying Home - Waive Appraisal?

Post by Ani »

From a sellers perspective---

I recently sold 2 homes in this market--
All offers were at asking or above asking price.

buyers who offered asking price-- thats a good back up option.

buyers who offered above asking--but did not waive appraisal contingency--did not trust their offers. It made no sense to me to offer above asking and not waive the appraisal contingency.

buyers who offered above asking and offered to pay the gap in appraisal upto a certain dollar amount--- great-used as backup.

buyers who offered above asking and waived appraisal contingency completely-- got the homes.

It all depends on how much you want the home and hot your market is.

Hope it helps.
User avatar
hand
Posts: 2201
Joined: Sun May 17, 2009 8:42 pm

Re: Buying Home - Waive Appraisal?

Post by hand »

Ani wrote: Thu Oct 21, 2021 2:03 pm From a sellers perspective---

I recently sold 2 homes in this market--
All offers were at asking or above asking price.

buyers who offered asking price-- thats a good back up option.

buyers who offered above asking--but did not waive appraisal contingency--did not trust their offers. It made no sense to me to offer above asking and not waive the appraisal contingency.

buyers who offered above asking and offered to pay the gap in appraisal upto a certain dollar amount--- great-used as backup.

buyers who offered above asking and waived appraisal contingency completely-- got the homes.

It all depends on how much you want the home and hot your market is.

Hope it helps.
This is really helpful real world feedback.

As a counterpoint, if I had a property with flaws likely to be identified during inspection, I would 1) be selling my property now, and 2) heavily prioritizing buyers willing to waive inspection.

Skipping inspection will undoubtedly help you win the house, but being sure you want to win the house is another thing entirely...
gogleheads.orb
Posts: 194
Joined: Fri Oct 18, 2013 12:34 pm

Re: Buying Home - Waive Appraisal?

Post by gogleheads.orb »

there seems to be some confusion between waiving the inspection and waiving the appraisal. Waiving the appraisal seems fine to me. We did it. If you have enough assets to cover any additional down payment required I don't see a risk. You are the one deciding how much the house is worth. I don't think the opinion of the appraiser adds any value to you.
LawEgr1
Posts: 253
Joined: Tue Dec 27, 2016 9:34 pm

Re: Buying Home - Waive Appraisal?

Post by LawEgr1 »

gogleheads.orb wrote: Thu Oct 21, 2021 2:19 pm there seems to be some confusion between waiving the inspection and waiving the appraisal. Waiving the appraisal seems fine to me. We did it. If you have enough assets to cover any additional down payment required I don't see a risk. You are the one deciding how much the house is worth. I don't think the opinion of the appraiser adds any value to you.
I presumed the OP was referencing the contingency and not being able to waive the appraisal since folks often intermingle the terms but mean contingency. But yes I agree, this is an important distinction for OP. My response was on the contingency.
Capsu78
Posts: 671
Joined: Wed May 18, 2016 10:30 am

Re: Buying Home - Waive Appraisal?

Post by Capsu78 »

I follow Garth Turner at https://www.greaterfool.ca/
Several times a week his blog covers the insanity in the RE market across Canada. Waiving appraisals and inspections seems to have become SOP in Canada. I have picked up some lessons from him that still apply to the US.
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Buying Home - Waive Appraisal?

Post by Nate79 »

The appraisal is to protect the bank when you are getting a mortgage with high loan to value. Luckily our last house we had sufficient down payment to not need to waste our money on the appraisal. Unless you can pony up extra money to cover any appraisal gap when getting your mortgage then I wouldn't waive appraisal.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Buying Home - Waive Appraisal?

Post by JoeRetire »

outlierZ wrote: Thu Oct 21, 2021 6:40 am We are in the process of buying a home and the agent said we will have a higher chance of getting the home if we waive the appraisal. The houses in the neighbourhood (similar style, sq.ft, etc.) are recently getting sold for 5.5 - 7% higher than the listing price. In that regard, I have following questions:
1. How would you approach this? Advisable, Not advisable?
I wouldn't. But you get to decide if you have enough cash to make the down payment higher if the appraisal comes in low.
2. If the buyer's agent put in the contract that the seller will waive appraisal but the house comes back with an appraisal of only 3%, is there a way to handle this situation?
Do you mean "the buyer will waive appraisal"?

If so, there is nothing to handle here. You simply increase your down payment to cover the difference.
This isn't just my wallet. It's an organizer, a memory and an old friend.
srt7
Posts: 1357
Joined: Mon Sep 29, 2014 12:19 pm

Re: Buying Home - Waive Appraisal?

Post by srt7 »

outlierZ wrote: Thu Oct 21, 2021 6:40 am We are in the process of buying a home and the agent said we will have a higher chance of getting the home if we waive the appraisal. The houses in the neighbourhood (similar style, sq.ft, etc.) are recently getting sold for 5.5 - 7% higher than the listing price. In that regard, I have following questions:
1. How would you approach this? Advisable, Not advisable?
2. If the buyer's agent put in the contract that the seller will waive appraisal but the house comes back with an appraisal of only 3%, is there a way to handle this situation?

Any other advice or experience around this would be highly appreciated.
Flexibility and negotiations are the key to this housing market. My recommendation is to agree to waive the appraisal but with a limit. For example: If the purchase price is $500K you will match up to $10K (or 2%) in difference of appraisal. Meaning if the appraisal comes in at $480K then you agree to a purchase price of $490K and the seller needs to meet you there.
Taking care of tomorrow while enjoying today.
Nowizard
Posts: 4839
Joined: Tue Oct 23, 2007 5:33 pm

Re: Buying Home - Waive Appraisal?

Post by Nowizard »

Depends on the amount of the earnest money and willingness to walk away and lose it. Have your inspection after offer accepted and act accordingly.

Tim
Post Reply