When a homebuyer applies for a mortgage loan, the lender will typically require an appraisal of the property to determine its value. If the appraised value of the property is lower than the agreed-upon purchase price, the lender may only be willing to loan the amount of the appraised value. This can leave the homebuyer responsible for making up the difference in cash, which may be difficult or even impossible for some buyers.

This difference between the fair market value of a property determined by an appraiser and the amount that a buyer is willing to pay is referred to as an “appraisal gap.” As tight inventory and affordability constraints continue to put pressure on borrowers, the uncertainty around appraisal gaps may add an extra layer of anxiety to the homebuying process.

While Fannie Mae and Freddie Mac have been offering value acceptance (appraisal waivers) on purchase loans, the number of eligible transactions has remained rather limited. To provide more certainty at application, Fannie Mae recently announced the Value Acceptance + Property Data solution.

Value acceptance + property data extends value acceptance (appraisal waiver) benefits to more borrowers while identifying current subject property characteristics like condition. To determine a loan's eligibility, lenders submit the purchase contract amount and other loan data points to Desktop Underwriter®. If the response confirms that the value is accepted, the lender will then order a property data collection from an approved vendor to satisfy the requirements.

The property data collection consists of a full interior and exterior inspection, requiring the capture of data and images throughout the subject property. While the property data collection may take a few days to complete as it necessitates coordinating a single visit to the property, the valuation acceptance is immediate. This real-time eligibility feature goes a long way in giving borrowers certainty earlier and removing the angst that precedes an appraisal. 

While lenders and borrowers have welcomed the news, it’s important to remember that the appraisal gap is not always a bad thing. A difference in valuation can provide an opportunity for both the buyer and seller to negotiate and come to an agreement that is acceptable to both parties. Ultimately, the goal of both the buyer and seller should be to find a fair price that reflects the true value of the property in question.