What risk do borrowers take when a lender issues a property inspection waiver (PIW)?

When a lender issues a Property Inspection Waiver (PIW), borrowers undertake the risk of potentially overpaying for the property. A PIW allows the borrower to forgo a physical inspection, which means they may not be aware of hidden issues or necessary repairs that could impact the property's value. The absence of an in-person inspection can lead to situations where the buyer might pay the full asking price or a higher amount without fully understanding the condition of the property.

This lack of visibility on the true state of the property can result in unforeseen costs and repairs that could have been identified during a standard inspection. Therefore, the risk of overpaying arises because the buyer might rely solely on the assessed value or market conditions instead of comprehensive property condition insights. This highlights the importance of having thorough knowledge of a property before making significant financial decisions, such as purchasing a home.