The pandemic’s latest effect on the housing market could be a good one for borrowers: Fewer home loans are requiring a home appraisal, which is making it a whole lot easier for some people to purchase a home or qualify for a loan refinance. According to a September report from the public policy think tank American Enterprise Institute, appraisals were waived on 42% of all conforming loans in July, up from roughly 20% in December. Not having to pay for an appraisal saves borrowers money. Appraisals for a single-family home cost, on average, between $312 and $405, according to home services marketplace HomeAdvisor.
Waivers also speed up the mortgage approval process. With a waiver, buyers and refinancers “don’t have to sit around waiting for an appraisal to come in,” says Donald Frommeyer, ex-President of the National Association of Mortgage Brokers (NAMB), thus streamlining the loan approval process. “I’ve heard horror stories where it’s taken people 30 days, or longer, to get an appraisal,” Frommeyer says. Having an appraisal waiver also enables buyers to waive the appraisal contingency when they make an offer on a house, which can give them a leg up when facing multiple bids. On the other hand, buyers don’t know if they’re overpaying for a home. An appraisal can show purchasers whether there’s a gap between their contract price and their prospective home’s market value. Borrowers can hire appraisers independently if they still want an appraisal -- but most are backed-up today.