Navigating the VA loan appraisal process can be a daunting task for many veterans.
However, understanding the nuances of this process is crucial to securing your dream home with the VA benefits you’ve rightfully earned for serving our country.
In this article, we’ll break down what a VA loan appraisal entails, what to look for, and how to effectively understand the appraisal report.
Table of Contents
What is a VA Loan Appraisal?
A VA loan appraisal is a critical component of the VA home buying process.
Unlike a regular home appraisal, the VA loan appraisal serves two main purposes: (#1) to assess the market value of the property and (#2) to ensure the home meets the VA’s Minimum Property Requirements (MPRs).
These appraisals are conducted by professionals who are specifically trained and certified to evaluate properties for VA loans.
Understanding the VA Appraisal Process
The VA appraisal process begins once you’ve made an offer on a home and applied for a VA loan.
Here’s what happens:
- Ordering the Appraisal: Your lender will order the appraisal as part of the loan processing. The VA assigns an independent VA appraiser from its panel.
- Conducting the Appraisal: The appraiser visits the property to assess its condition and compare it to similar properties in the area. This involves a physical inspection of the interior and exterior.
- Assessing Market Value and Compliance: The appraiser determines the fair market value of the home and checks for compliance with the MPRs. This includes evaluating safety, structural integrity, and sanitation standards.
- Issuing the Certificate of Value (COV): The appraiser issues a COV, which includes the estimated value of the property and any required repairs before the VA can guarantee the loan.
What to Look For in a VA Loan Appraisal
When reviewing your VA loan appraisal, pay attention to the following key aspects:
- Estimated Market Value: This is the appraiser’s opinion of what the property is worth. It affects how much the VA will guarantee for your loan.
- Comparative Market Analysis (CMA): This section shows how your home compares to similar properties in terms of price, size, and condition.
- Minimum Property Requirements (MPRs): Check for any MPR issues noted by the appraiser. This could include problems with the roof, electrical systems, plumbing, or general safety hazards.
- Required Repairs: If the appraiser notes necessary repairs, these must be completed before the loan can be finalized. Understanding what repairs are needed and their extent is crucial.
How to Read the VA Appraisal Report
The VA appraisal report can be lengthy and detailed. Here’s how to navigate it:
- Summary of the Property: Start with the general information about the property, including size, age, and a description of the area.
- Condition of the Property: Review the appraiser’s notes on the physical condition of the home. Look for any mention of structural damage or elements that do not meet the VA’s standards.
- Adjustments: Notice any adjustments the appraiser has made in comparing your property with others. This might include adjustments for age, size, or location.
- Photos and Maps: Appraisal reports will include photographs of the home and a street map. These visuals help verify the property’s condition and location.
- Final Valuation and COV: The most critical part of the report is the final valuation. This determines if the price you’ve agreed to pay is appropriate and if the loan amount you’ve requested is justified.
Common Issues Found in VA Appraisals
Several common issues can arise during VA appraisals, including:
- Roofing Problems: Roofs with less than five years of remaining life often require replacement or repair.
- Faulty Systems: Problems with electrical, heating, or plumbing systems are common and must be fixed to meet MPRs.
- Structural Issues: Any signs of foundational or structural damage can be a red flag during a VA appraisal.
- Health and Safety Hazards: Peeling paint, mold, or exposed wiring can all pose significant health risks and will need to be addressed.
How to Handle Appraisal Issues
If your appraisal identifies issues, here are steps you can take:
- Negotiate Repairs: You can ask the seller to make the necessary repairs or to lower the price of the home to cover the costs.
- Reconsider Your Offer: If the appraisal comes in lower than your offer, you may need to renegotiate the price with the seller.
- Appeal the Appraisal: If you believe the appraisal is inaccurate, you can request a Reconsideration of Value (ROV) through your lender.
What If My VA Appraisal is Too Low?
If your VA appraisal is too low, consider these steps:
Renegotiate the Purchase Price:
- Explain the situation to the seller with a copy of the appraisal report.
- Negotiate a price reduction to match the appraised value.
Request a Reconsideration of Value (ROV):
- Gather evidence of comparable property sales that support a higher valuation.
- Work with your lender to submit a formal ROV request to the VA.
Pay the Difference Out of Pocket:
- Consider paying the difference between the appraised value and the purchase price if financially feasible.
Look for Another Property:
- If other options fail, consider finding a new property that aligns with the appraised value to ensure you don’t overpay.
What is the Average VA Appraisal Cost?
The cost of a VA appraisal can vary depending on several factors, including the location of the property, the type of property, and the complexity of the appraisal.
Here are some general guidelines for typical VA appraisal fees:
- Single-Family Homes: The typical fee for a VA appraisal of a single-family home ranges from $400 to $600.
- Condominiums: The typical fee for a VA appraisal of a condominium is slightly lower than that for a single-family home, generally ranging from $300 to $500.
- Manufactured Homes: Appraisals for manufactured homes usually fall within the range of $400 to $600.
- Multi-Unit Properties: For multi-unit properties, such as duplexes or triplexes, the appraisal fees are higher, typically starting around $500 and can go up to $800 or more, depending on the number of units and location.
- Additional Charges: There may be additional charges for travel expenses if the property is located far from the appraiser’s office, or for complex appraisals, such as those involving historic homes or properties with extensive renovations.
These fees are necessary to cover the costs of the appraiser’s time and expertise, and they ensure that the property meets the necessary standards for a VA loan.
Keep in mind that these fees are generally paid upfront and are part of the closing costs associated with your VA loan.
VA Appraisal vs. VA Inspection: What’s the Difference?
A common misunderstanding among many veterans is equating the VA loan appraisal with a home inspection.
While both involve evaluating the property, their purposes are fundamentally different:
- VA Loan Appraisal: This is required by the Veterans Affairs to assess the fair market value of the home and ensure it meets specific safety and habitability standards known as Minimum Property Requirements (MPRs).
- Home Inspection: This is a more detailed examination of the property’s condition, typically conducted to protect the potential buyer against purchasing a property with serious defects.
Understanding this distinction is vital because it sets the expectation that the appraisal is not a substitute for a home inspection but a complementary evaluation that serves a different purpose.
How to Handle Your Lender: Navigating Potential Pitfalls
Another critical aspect often overlooked is the role of the lender in the VA appraisal process.
Some veterans face challenges with lenders who may not communicate effectively or value the veteran’s time.
This can lead to frustrations and delays.
Knowing how to handle such situations, advocating for yourself, and possibly seeking a more responsive lender are crucial steps in ensuring a smoother process.
Personalized Assistance: Enhancing the Veteran’s Experience
Veterans deserve personalized and responsive service throughout their home buying journey.
Unlike the typical transactional nature of many lenders, some VA loan specialists offer direct communication lines, providing a more hands-on and reassuring experience.
This level of service not only helps in navigating the appraisal process but also fosters a sense of trust and respect, acknowledging the veteran’s service and sacrifice.
Accommodations for Disabled Veterans
An essential yet often under-discussed aspect of VA appraisals is their consideration for accessibility needs of veterans with disabilities.
The appraisal process assesses whether a home meets necessary accessibility standards, which is critical for veterans who require modifications for mobility aids or other accommodations.
This ensures that the home not only is a safe and sound investment but also a comfortable and functional living space for all its occupants.
Conclusion & Wrap-Up
Understanding your VA loan appraisal is crucial to leveraging your VA benefits effectively.
By knowing what to look for and how to read the appraisal report, you can navigate this process more confidently, ensuring that the home you choose is a worthy investment.
Remember, this appraisal not only helps you understand the value and condition of your potential new home but also protects you from overpaying.
Armed with this knowledge, you’re well on your way to securing a home that meets both your needs and standards.
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About the Author
Brian Reese is a senior advisor and co-owner at District Lending. He is one of the world’s leading experts in veteran benefits, having helped millions of veterans secure their financial future since 2013. Brian is the founder VA Claims Insider, an education-based Coaching & Consulting company whose mission is to educate and empower veterans to get the VA disability benefits they’ve earned for their honorable service. A former active-duty air force officer, Brian deployed to Afghanistan in support of Operation Enduring Freedom. He is a distinguished graduate of management of the United States Air Force Academy and earned his MBA as a National Honor Scholar from the Spears School of Business at Oklahoma State University.