Buying Home - Waive Appraisal?
Buying Home - Waive Appraisal?
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.
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.
Re: Buying Home - Waive Appraisal?
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.
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.
Re: Buying Home - Waive Appraisal?
Thank you! We have financing involved.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.
Re: Buying Home - Waive Appraisal?
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.
Re: Buying Home - Waive Appraisal?
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.
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.
Re: Buying Home - Waive Appraisal?
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.
posted at the same time.
You are better off with a dollar amount then an open ended waiver.
posted at the same time.
Re: Buying Home - Waive Appraisal?
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
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
Re: Buying Home - Waive Appraisal?
+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
Re: Buying Home - Waive Appraisal?
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.
Both my purchases in my life waived appraisal. Both appraised at purchasing price but it can easily go 10% lower.
Waive Appraisal? - We did
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.
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.
Re: Buying Home - Waive Appraisal?
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.LawEgr1 wrote: ↑Thu Oct 21, 2021 12:10 pm+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
Re: Buying Home - Waive Appraisal?
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.
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.
Re: Buying Home - Waive Appraisal?
That's a great idea!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.
Re: Buying Home - Waive Appraisal?
+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.
Re: Buying Home - Waive Appraisal?
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.
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.
Re: Buying Home - Waive Appraisal?
This is really helpful real world feedback.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.
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...
-
- Posts: 194
- Joined: Fri Oct 18, 2013 12:34 pm
Re: Buying Home - Waive Appraisal?
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.
Re: Buying Home - Waive Appraisal?
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.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.
Re: Buying Home - Waive Appraisal?
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.
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.
Re: Buying Home - Waive Appraisal?
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.
Re: Buying Home - Waive Appraisal?
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.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?
Do you mean "the buyer will waive appraisal"?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?
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.
Re: Buying Home - Waive Appraisal?
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.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.
Taking care of tomorrow while enjoying today.
Re: Buying Home - Waive Appraisal?
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
Tim