Soon You May Be Able to Buy a House Without an Appraisal
Here’s something that may finally speed up the typically slow home loan process: an appraisal-less home purchase. Yep, it’ll be a reality for some folks come September thanks to a new initiative by Freddie Mac. First a little background. The dreaded home appraisal, which can take weeks to complete, is often an item that turns what could be a two-week process into a month-long one. Of course, buyers and sellers aren’t always in that big of a rush. And one could argue that an independent valuation is good for all parties. That stuff aside, an appraisal waiver will save the homeowner money because they won’t have to pay for one in certain situations. How much they save depends on what the lender charges, but it could be $500 or more.
Freddie Mac’s Automated Appraisal Alternative
You might be wondering how Freddie Mac will be able to forego an appraisal, seeing that it’s a pretty important piece of the mortgage qualification pie. After all, lenders are lending out a lot of money, so they can’t just take the seller’s or borrower’s word for it that the home is worth X. That’s where big data comes in. The government-sponsored enterprise refers to their tool as an “automated appraisal alternative.” What that means in layman terms is that Freddie will use some fancy algorithms to determine if an appraisal is even necessary using its automated collateral evaluation (ACE). The ACE tool analyzes data from multiple listing services (MLS) aka for-sale listings, public records, and “a wealth of historical home values” to help determine collateral risk. So I guess that means if the purchase price is in-line with what comparable homes in the area have been selling for recently and historically, Freddie Mac may give you and your lender a free pass. As noted, that could save you several hundred dollars and make it a lot easier to close on time, or even early. If it turns out that the home value provided by the lender is “acceptable,” Freddie Mac’s ACE will spit out a decision, providing the lender with immediate representation and warranty relief related to the property value.
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