Do you need an appraisal?

Whether you’re refinancing or purchasing a home, it may be possible to do so without an appraisal.

Maybe not.

The Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) have both announced a new property valuation option.

Consumers who are buying homes or refinancing existing mortgage loans may be eligible for an automated appraisal alternative, otherwise known as an “automated valuation” or what lenders refer to as an “appraisal waiver.”

A regular appraisal in California will cost a borrower at least $500 (much more for investment properties, duplexes, rural homes, manufactured homes, or very large custom properties). This move not only saves money for borrowers, but also speeds up the loan process by an average of 7–14 days when an appraisal is not ordered.

How does this work?

Here’s an example:

The borrower applies for a mortgage loan and the lender submits the loan to an automated underwriting system, let’s say Freddie Mac’s system.

Freddie Mac’s automated collateral evaluation (ACE) assesses the need for a traditional appraisal by leveraging proprietary models, and using data from multiple listing services and public records as well as a wealth of historical home values to determine collateral risks.

If Freddie Mac’s automated evaluation determines that the estimated value provided by the lender is accurate and acceptable, an appraisal is not necessary and the lender doesn’t have to order one.

According to David Lowman of Freddie Mac:

By leveraging big data and advanced analytics, as well as 40+ years of historical data, we’re cutting costs and speeding up the closing process for borrowers. At the same time, we’re providing immediate collateral representation and warranty relief to lenders. This is just one example of how we are reimagining the mortgage process to create a better experience for consumers and lenders.

Will an automated valuation always work?

Unfortunately, no. If you have a rural or unusual property, there may not be enough data for an automated collateral evaluation because there aren’t enough sales comps (comparable values) or historical data to use.

Additionally, all loans and conditions are risk-layered so if you’re borrowing a high percentage of the homes value, or putting very little money down, an appraisal will be necessary.

FEMA disaster areas

Properties in a designated Federal Emergency Management Agency disaster area zip code will not receive appraisal waivers until disaster designations are lifted by FEMA.


Network Mortgage submits loans directly through Fannie Mae and Freddie Mac’s automated underwriting systems, therefore borrowers know very early in the loan process if an appraisal will be necessary and we are seeing more appraisal waivers than ever before.

portrait kristen wilson
About Kristen Wilson

Kristen Wilson is a licensed loan officer and owner at Network Mortgage in Chico, California. She has been helping clients with mortgage financing for over 25 years.

CA DRE: 01146146 / NMLS: 238825