VA Appraisals
The VA appraisal is an assessment conducted by a Veteran Affairs-accredited appraiser that determines the market value and condition of a VA eligible property for the borrower. As part of their examination, they meticulously inspect the house to guarantee it fulfills all criteria set down by the U.S Department of Veterans Affairs for approval.
The VA Appraiser will evaluate the property for a total value. They will inspect the general condition of the property, measure the square footage, and make comparisons to similar properties in the area that has recently sold. They will also do home inspections to make sure the home is structurally sound, safe and sanitary.
Once they have gathered the information, they will write a report and submit it to the lender. The report is to make sure the property has sufficient value for the proposed loan amount. The VA, the appraiser and the lender will work together to address any issues raised within the appraisal report.
8 Things you must know about VA Appraisals
1. VA Appraisals are mandatory
An eligible borrower will have a lot of choices to make on your home buying quest.
Every home purchased with a VA loan must be evaluated by a VA-certified appraiser.
2. The VA Appraisal has two Purposes
The VA appraiser has two tasks:
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Determine the home’s fair market value.
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The eligible borrower's lender needs to know the market value for the property in question. The market value helps buyers ensure they’re not overpaying for a property and helps lenders ensure they’re not putting borrowers in an “upside-down” mortgage from the start. The appraiser uses current market data and recent sales to determine this value for each property.
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Ensure the property meets the VA’s Minimum Property Requirements (MPRs). The VA has a unique list of MPRs to which all properties must adhere. Those broad guidelines ensure that homes purchased by veterans are safe and move-in ready.
3. The VA Appraisal fee is often required upfront
Buyers will usually need to pay for the appraisal upfront.
4. VA Appraisals are usually completed within 10 days from order date.
VA appraisers are committed to providing completed appraisal reports within ten days. Ten days is the normal timeline to complete a VA appraisal, however, turn times vary based on demand.
The VA issues appraisal timeline requirements for each state based upon the amount of VA appraisers in the area and demand. VA appraisals have a few more guidelines than actual requirements compared to conventional appraisals. If the VA appraiser identifies significant repairs, then the repairs will have to be completed and a second VA inspection will be required to verify repairs are completed.
5. How long is a VA Appraisal valid?
VA appraisals are valid for six months from the effective date of the appraisal for purchase and refinance loans or until the loan closes for purchase loans.
The VA Appraisal is not a Guarantee that Your Home is Perfect.
The VA appraiser ensures homes are:
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Safe
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Structurally sound
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Sanitary facilities
6. The VA Appraisal is not a home inspection.
The VA appraiser is required to determine the market price of the home. The appraiser will carefully measure the value of the property against MPR criteria. A home inspector has the responsibility to identify all deficiencies in a home. Most often, home inspections are required for purchasing a home not refinancing.
VA appraisers seldomly go beyond the bounds of the MPR checklist. On the other hand, a home inspector will document every deficiency identified on the property. The inspector documents findings with photos, makes recommendations and may estimate the cost of needed repairs.
A professional home inspection report can be used to renegotiate a purchase contract and should never be overlooked. Some buyers prefer to have the home inspection first before deciding whether to move forward with a VA appraisal.
7. The VA Appraisal could send the eligible borrower's purchase in a different direction.
Most VA appraisals are completed without complications. It's important to recognize that the results of the VA appraisal could send a purchase down a different track. Consider these potential challenges:
What happens if my home doesn't meet the minimum property requirements?
The property doesn’t meet MPR criteria. If the appraiser requires repairs to bring the home up to MPR standards, buyers have a few options to consider. They can negotiate with the sellers to make the repairs.
They can look into paying the repairs themselves or walk away from the purchase.
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The appraisal value falls short of the loan amount. If the appraisal value is below the target loan amount, buyers again have a choice to make. Buyers can:
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Ask the seller to lower the purchase price
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Make up the difference in cash
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Walk away from the purchase
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Petition the VA for a Reconsideration of Value
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8. The VA Appraisal doesn’t have to be intimidating.
VA appraiser's main objective is to identify the true market value of the home. Therefore, if you are purchasing a home, this report will confirm if you are over or under paying on the purchase price of the home.
Having a good understanding of the process of buying or refinancing a home is important to avoid potential problems. If the borrower is planning on any of the following, they could be in for a rough road:
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Purchasing a fixer-upper
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Buying farm land
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Purchasing a vacation home
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Buying an ineligible investment property
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Buying without a real estate agent
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Working with an inexperienced VA lender
Appraisals: Who selects the appraiser for a VA loan?
The VA selects and assigns the appraiser. The lender may not select an appraiser for a VA home loan. This is to ensure the appraiser is neutral and works in the best interest of both the borrower and the lender. The VA will handle the entire appraisal process, they will pick the best appraiser for the borrower in their area.
How does an eligible VA borrower prepare for appraisal?
The eligible borrower will be responsible for the payment of the full VA appraisal fees. They must prepay for the appraisal. Once the fee is paid, the eligible borrower will need to wait for the appraisal report. They will receive a copy of the VA appraisal for their records. The report will provide a reasonable amount for the estimated value of the home. They may also provide a list of repairs needed prior to securing a VA loan. The eligible borrower may share with their realtor or the sellers of the home if they choose.
The value of the home should be higher than the requested amount to borrow. This may increase the borrower’s chances of securing the VA home loan. The appraisal will be submitted to the underwriter for review. The underwriter will issue a Notice of Value (NOV) to the VA, borrower and lender.
The NOV is a document which provides the fair market value of the home. It will include a list of minimum property requirements that the VA states the house must meet prior to closing. The NOV may also include items that need to be repaired, termite inspection, home inspection, and proof a condominium is in a VA approved development.
Why is a Notice of Value (NOV) in a VA appraisal important?
The NOV is important as is shows the eligible borrower is about to close the loan. This document will show the eligible borrower has met all of the minimum requirements for a VA loan. The NOV assures the VA appraisal report has been reviewed and verified. The VA and the lender are not allowed to approve the loan before a NOV is issued.
What happens if the property does not meet the value?
There are instances where the appraised property value is less than the proposed loan amount. The lender will not approve the eligible borrower’s application if the loan amount is higher than the home appraised value. Here are a few examples that may help:
1. Renegotiate with the seller.
Ask the seller to consider reducing the cost to match the appraisal amount.
2. Request a reconsideration of value.
The VA may consider the request after receiving comparable sales from the borrowers’ real estate agent and lender. They may also reconsider if there have been value adding repairs and upgrades after the appraisal.
3. Pay the difference out of pocket.
The borrower may decide to pay the difference with their own funds. This should be discussed with the borrower’s real estate agent and lender. Choosing to pay more than the value of the home is not considered a wise choice.
4. Cancel the contract.
The borrower may cancel the contract. They will not be refunded their appraisal fee. They may cancel the contract if the house has serious conditions, such as, safety issues, health hazards, or structural issues. They should discuss with their real estate agent and mortgage lender, prior to cancelling.
Are there any other challenges with a VA Appraisal?
Home values are not the only challenges when an eligible borrower has a full VA home inspection and appraisal. The other issue is making sure the home meets the minimum property requirements (MPRs). The VA has various property and occupancy requirements that must be met prior to securing a VA home loan. Here are a few examples that may help.
1. Ask the seller to make repairs. The seller may make the repairs, but the are not obligated to complete any repairs.
2. The eligible borrower may make the repairs themselves. If the seller is unwilling to make repairs and they are not expensive repairs, then the borrower may choose to make them.
3. Cancel the Contract. If there are no other options, then the eligible borrower may walk away from the contract.
What is tidewater rule in VA Home Appraisals?
There is an extra step in a VA Home Appraisal, when the home’s value is lower than its purchase price, this is called Tidewater. This allows the VA appraiser to request additional evidence regarding this discrepancy before completing their report.
This allows real estate agents a 24–48-hour window to provide evidence of their stated sale cost.
The real estate agent must submit the following information:
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Comparable sales.
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A list of improvements on the property.
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Other relevant market data.
When used properly, the Tidewater Policy may make obtaining a VA loan more efficient and simpler. Additionally, the VA has an experienced team of appraisal experts to evaluate any potential comparable sales that could help the loan officer determine what the intended property is really worth.
In Conclusion:
The VA appraisal report provides crucial information that helps lenders determine whether or not they will approve an eligible borrower’s request for a VA home loan. It will also set an upper limit on what the eligible borrower may borrow. It’s important for eligible borrowers to research, understand all of the details involved in this process, and be prepared before engaging with a lender.
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