Tuesday, November 15, 2016

Appraisal-free mortgages - they are coming.

Freddie Mac is planning to dispense with traditional appraisals on some loan applications for home purchases.  They are looking to replace the appraiser with an alternative valuation system that would be free of charge to both lenders and borrowers.  Are you ready to put your trust in a computer?

The mortgage provider is looking to begin offering the computerized appraisals as early as next spring.  Freddie Mac claims that they plan to tap in to a vast trove of data it has assembled on millions of existing houses nationwide.

The benefits of this would be a savings of about $350 to $600 and avoidance of time delays.  While that sounds great for both the buyer and seller, is it?  Yes you can acquire the home at a slightly lower cost but the risks involved could be great.  Appraisers look at a variety of items in order to determine value.

Would an automated appraisal catch things like roof leaks, illegal wiring, foundation issues, or missing structural walls.  There are a variety of factors that a computer would not catch that a trained appraiser would.  

Is this a view into what the future will hold or a bad test.  We will see but inevitably appraisers will still be needed.  There are many transactions that are not typical and would call for a more through review.  

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