On Conventional (aka Conforming) Loans that go through Automated Underwriting Systems (AUS), we are sometimes given an Appraisal Waiver option for the Buyer/Borrower. It is difficult to predict if/when these waivers will be granted (as the criteria has proven sporadic), buth when present, they are called out on Desktop Underwriter (DU) and/or Loan Prospector (LP) AUS reports. Typically, the waiver is viewed as a positive, as the Buyer/Borrower saves ~$600 in extra fees, and there is one less "cook in the kitchen" to get in the way of a smooth & timely closing. The waiver is optional, but I've yet to encounter a Borrower who has opted to pay the extra fee when given the option to waive the appraisal. As Appraisers "age out" of the business while technology continues to infiltrate our industry, these waivers will be fairly common moving forward.

There are lots of criteria that make up a good loan.  The higher the down payment, the less the appraisal matters.  I have personally had two loans done for me where the down payments were even higher and the appraisals were waived.  There was a very large margin for error for the lender in both cases.

I don't think I've ever sold a property that required a physical appraisal (but I'm in Canada where we moved on from this decades ago!)  Ours are all automated - Founded in 1996 as a boon for the industry because it reduces turnaround times on decisions "from days to seconds" and offers lower costs per transaction. It has the most comprehensive database in Canada, including property information on approximately eight million properties.

Appraisal waivers are available in a tract where enough digital information is available on similar square footage subject property in past ninety days. A buyer or seller won't know in advance if a waiver will be granted. If the seller refinanced in past year, buyer is doing a conventional loan to GSE's (Fannie or Freddie) it is 28% likely a waiver is granted by the automated underwriting system. If buyer changed terms (say far less down payment) and the automated system is run again even at closing the waiver might not hold true. If buyer wants a full appraisal inspection they can opt to pay for one. The only reason why buyer might want the full interior human appraisal is if they think it will come in low and offer an opportunity to negotiate something more... In the past ten months most buyers waived these contingencies so that would not apply. The waiver saves the buyer money and time.

The appraisal is an entirely subjective document - comparable sales are public record, the only potential issue with no appraisal is that a lender can't be assured of the quality of the home being purchased or any potential issues inside the property.

Otherwise, it's just one persons opinion of value, and in the current market, those opinions mean less than they ever have as people are willing to pay substantially more than local comps in many cases and many markets.

An actual appraisal may, and often will, come in at the contract price since that is the important number.

Also, less down payment means higher monthly payments and more interest paid.

You may not have seen the "actual value" even if they did an appraisal.  All they have to come up with is the purchase price.    The new rules that get them in trouble keep the appraisals from showing the true value, especially if it is way over the purchase price.

Be happy and move on. It's not about what we want but what the buyers lender deems appropriate and acceptable. 

You have some good explanations here Shayne Stone 

I know one reason. If there is a lot of equity appraisals are often waived. 

Have to disagree. It is not my judgement whether they got a good deal or not - the buyer bought the place so the price was fine with them!  Then the price was OK with the bank but now they have to be sure it is ok with you now?

I'm all for reduction in paperwork. 

If YOU want to know the appraised value so you know what a deal it is, you can order (and pay for) the appraisal.

Maybe the lender doesn't care what a great deal you made them.  Maybe the lender just wants to know that it is worth what they are lending them.  If they are confident in that, there is no reason for them to require other people to spend money for your sake.

I've had some appraisal waivers but the buyer was usually putting much more than 20% down. They may be keeping them in portfolio vs. selling them. I have someone putting 75% down now and it will be interesting to see if they do an appraisal. My lender said they're seeing fewer of those since prices have really skyrocketed. 

I have heard of this a few times recently.

In my opinion appraisals are seldom that accurate and would not rely on them as the final judge of what a property is worth.

Wrong attitude. It ain't about you, it's about them, and a desktop appraisal makes life and the escrow easier for the buyers. I'll take'em all day long, my ego doesn't need that level of validation.

Curious what Jason E. Gordon  thinks?

likely because of the electronic evaluation program the bank has.

Did the buyer ask the lender why no appraisal was required? Or, when the buyer learned of that fact and conveyed it to you, did you recommend that they ask the lender? When an appraisal comes in low, it is questioned so it seems odd that no one questioned why no appraisal was required until after the closing.

The lender probably has loads of appraisals for certain areas allowing them to just compare properties instead of payrolling an appraiser? On another occasion, I bought a new property decades ago and didn't get a copy of the appraisal and neither did my neighbors who bought too. After we insisted on one, we all got the same appraisal just names filled in. Lenders have their own business model so I am not surprised in the end

I am surprised that the bank doesn't need an appraisal on a new purchase (re-fi I understand) Shayne Stone but if they are confident that the home is priced right and the loan is held in house I "get it".

I only ever recall no appraisal on one deal with a loan.  

Before I retired appraisals were required. Some secondary market rules were changed since then and waivers are now possible. A changing world.

Lenders will use a 'desktop appraisal' if they can, and waive appraisal. We had one not long ago, the tract was very uniform and the purchase price was consistent with the market. Also with 50% LTV they will often waive it if buyer doesn't demand one.

A lender needs to know that they have a good chance of getting their money back should the borrower default on their loan.

PIW ( property info waiver )  is  somehting  the  AUS  findings   allow for some transactions ..this allows  no appraisal  and is  normally  due to the property having had  a  fnma / fhlmc loan  on it  in the past few yrs ...Lenders cant  determine if this is an option until after the PSA is completed and the buyers updated  file ( with address ) is  re run through AUS for updated  approval