Navigating the appraisal process can be one of the more stressful aspects of securing a VA loan.
Especially when the appraisal value comes in lower than expected, it can seem like a major setback. However, there are well-defined steps you can take to appeal a low VA loan appraisal.
This article delves deep into the appeal process, providing detailed instructions, expert insights, and strategic advice to help you challenge an unfavorable appraisal effectively.
Table of Contents
Understanding the VA Appraisal Process
The VA appraisal serves a dual purpose: ensuring the property meets the VA’s Minimum Property Requirements (MPRs) for safety and habitability, and establishing the fair market value of the home.
- Health and Safety Standards: The appraisal checks for compliance with the VA’s safety and structural integrity standards.
- Market Value Assessment: Determines if the home’s purchase price is aligned with its market value based on comparable sales.
Common Reasons for Low VA Appraisals
Several factors can lead to a VA appraisal coming in lower than the purchase price:
- Fluctuating Market Conditions: Rapid shifts in the housing market can affect property values.
- Inaccurate Comparables: Selection of non-representative sales as comparables.
- Overlooked Features: Unique property features or recent upgrades may be missed.
The VA Tidewater Initiative
Before finalizing a low appraisal, the VA Tidewater process allows for an early intervention:
- Early Notification: Appraisers must notify lenders if it appears the property will appraise for less than the selling price.
- Submission of Additional Comps: The lender has two days to provide additional comparable sales to support the sale price.
How to Officially Appeal a VA Loan Appraisal
If the Tidewater initiative does not resolve the appraisal discrepancy, a formal Reconsideration of Value (ROV) can be pursued:
Steps to File an ROV:
- Collect Additional Comparables: Work with your real estate agent to identify recent, relevant sales that were not included in the initial appraisal.
- Identify Appraisal Errors: Review the appraisal for any inaccuracies or oversight in property details and comparables.
- Submit a Detailed Appeal: Provide a comprehensive package including new comps, evidence of errors, and a persuasive letter explaining the basis for the reconsideration.
Table 1: VA Appraisal vs. Reconsideration of Value
| Aspect | VA Appraisal | Reconsideration of Value (ROV) |
|---|---|---|
| Purpose | Determine property value and compliance | Challenge initial appraisal findings |
| Initiated By | VA Appraiser | Borrower through lender |
| Documentation Needed | Standard property data and comps | Additional comps, error documentation |
VA Loan Apprisial Guidelines
VA loan appraisals are unique because they require the property to meet both valuation assessments and the VA’s Minimum Property Requirements (MPRs).
The guidelines for a VA appraisal aim to ensure that the property is a safe, sanitary, and structurally sound investment for veterans. Here are the key aspects of VA appraisal guidelines:
- Minimum Property Requirements (MPRs):
- Safety: The home must be free from hazards that could harm the occupants, including but not limited to lead-based paint, exposed wiring, and significant structural damage.
- Sanitary: The property must have adequate sewage disposal and safe drinking water. It should also be free from pest infestation.
- Structural Integrity: The building must be structurally sound, with a roof that is free of leaks, solid floors, walls, and ceiling, and a functional heating system that is safe and adequate for the home.
- Living Conditions:
- The property must provide “decent, safe, and sanitary” housing with proper access from the street.
- It should have adequate space for living, sleeping, cooking and dining, and sanitary facilities.
- Access and Property Boundaries:
- The property must have access from a public or private street.
- There must be proper easements for utilities, and each property should be adequately separated from adjacent structures.
- Valuation:
- The appraiser must estimate the market value of the property by comparing it with similar properties that have recently sold in the area.
- Adjustments are made for any significant differences between the subject property and comparable properties.
- Property Specific Issues:
- Condominiums must be in VA-approved developments.
- Manufactured homes must be affixed to a permanent foundation and classified as real property.
- Mechanical Systems:
- Electrical, heating, and plumbing systems must be in good working order and have reasonable future utility, durability, and economy.
- Roof and Crawl Space:
- The roof should have a remaining life of at least five years. If not, it must be replaced.
- Crawl spaces must be accessible, properly vented, and free of moisture, standing water, and pests.
The VA appraiser will conduct a thorough inspection of the property based on these guidelines. If the property fails to meet any of the MPRs or if the valuation doesn’t match up with the agreed purchase price, the VA may require repairs or adjustments before the loan can be finalized.
Veterans and sellers can work together to resolve these issues, which may involve negotiating repairs or adjusting the sale price based on the appraisal findings.
Expert Advice on Navigating the Appeal Process
“Understanding the specifics of your property and the market is crucial when challenging a VA appraisal,” advises James Lincoln, a Senior Mortgage Advisor at Trust Home Loans. “Presenting clear, well-documented evidence that contradicts the initial appraisal can significantly enhance your appeal’s success rate.”
“Engage with your real estate agent to gather robust comparables that truly reflect your property’s market value,” suggests Lisa Monroe, a VA Loan Specialist at Veterans Financing Group. “Detailed, accurate comps are often key to successful appraisal reconsiderations.”
Preparing for the Appeal
Gather as much information as possible to support your claim:
- Recent Sales Data: Focus on sales that occurred close to your appraisal date.
- Detailed Property Analysis: Document all property features and improvements.
FAQs on VA Loan Appraisal Appeals
How often do VA loan appraisals come in low?
Low appraisals are not exceedingly common but can occur when market conditions change rapidly or if the initial appraisal is flawed.
What can I do if my appeal is denied?
If your appeal does not succeed, you can discuss with the seller the possibility of lowering the price, or you may need to increase your down payment to cover the difference.
Can I choose my appraiser for the ROV?
No, VA appraisers are assigned at random to ensure impartiality. You cannot request a specific appraiser for the initial appraisal or the ROV.
How long does the ROV process take?
The ROV process typically takes a few days to a few weeks, depending on the complexity of the appeal and the workload of the appraisers.
What are my options if the ROV still values the home below the purchase price?
If the ROV still falls short, you can renegotiate the purchase price with the seller, make up the difference in cash, or walk away from the deal with your earnest money protected.
Conclusion
Appealing a VA loan appraisal requires a structured approach and detailed documentation.
Understanding the appraisal process, knowing when and how to gather additional evidence, and working closely with your real estate professionals can significantly increase your chances of a favorable outcome.
Armed with the right knowledge and resources, you can navigate this challenge and move closer to securing your new home under the terms that make sense for you.
