Understanding the VA Home Appraisal

The VA appraisal is a critical component of the VA home loan process, ensuring that the property a veteran wishes to purchase is worth the amount they plan to borrow.

This appraisal not only protects the buyer from overpaying but also safeguards the lender and the VA by confirming the home’s market value and ensuring it meets certain minimum property requirements (MPRs).

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What is a VA Appraisal?

A VA appraisal is an evaluation performed by a licensed VA-approved appraiser to determine the current market value of the home. The appraisal is required for any home purchase or refinance loan backed by the Department of Veterans Affairs (VA).

The goal is to ensure that veterans are purchasing homes that are safe, sound, and sanitary, and that the home’s value supports the loan amount.

Key Objectives of a VA Appraisal:

Determine Market Value: Ensures that the loan amount does not exceed the property’s market value.
Check Minimum Property Requirements (MPRs): Verifies that the property meets the VA’s safety, soundness, and sanitation standards.
Mitigate Risk: Protects both the borrower and the lender from investing in an overvalued property.

VA Appraisal vs. Home Inspection

It’s crucial to understand that a VA appraisal is not the same as a home inspection. While both involve an assessment of the property, their purposes differ:

VA Appraisal: Focuses on determining the market value and ensuring the home meets MPRs.
Home Inspection: A more detailed examination of the home’s condition, including the foundation, roof, electrical systems, plumbing, and more.

A home inspection is highly recommended but not required by the VA. The appraisal, on the other hand, is mandatory for VA loans.

Understanding Minimum Property Requirements (MPRs)

The VA has established a set of Minimum Property Requirements (MPRs) to ensure that the homes veterans purchase are safe and livable. The appraiser assesses the property against these standards during the appraisal process.

Key MPRs Include:

Safety: The home must be free from hazards that could pose a risk to occupants, such as exposed wiring or unstable structures.
Soundness: The property must be structurally sound, with no major defects in the foundation, roof, or other critical components.
Sanitation: The home must have adequate sanitation facilities, including a functional sewage system and clean water supply.

If the appraiser finds issues that do not meet these MPRs, the problems must be addressed before the loan can proceed. This could involve repairs by the seller or a renegotiation of the sale price.

The VA Appraisal Process: Step-by-Step

The VA appraisal process typically involves the following steps:

Order the Appraisal: After the buyer and seller agree on a purchase price and sign the sales contract, the lender orders the VA appraisal through the VA’s online portal, known as the WebLGY system.
Property Visit: A VA-approved appraiser visits the property to conduct a thorough evaluation, assessing the home’s condition, its value based on comparable sales, and compliance with MPRs.
Appraisal Report: The appraiser submits a detailed report to the lender, including the estimated market value of the property and notes on any required repairs to meet MPRs.
Review and Decision: The lender reviews the appraisal report. If the appraised value is at or above the purchase price, and the property meets MPRs, the loan can proceed. If issues are found, they must be resolved before closing.
Re-Appraisal (if necessary): If repairs are needed to bring the property up to VA standards, the appraiser may need to revisit the property to confirm that the issues have been fixed.

Common Issues That Affect VA Appraisals

Several factors can impact the outcome of a VA appraisal, potentially causing delays or complications in the loan process:

Low Appraisal Value: If the appraised value is lower than the agreed-upon purchase price, the borrower must either negotiate a lower price with the seller or make up the difference out of pocket. Alternatively, the buyer can request a reconsideration of value (ROV) from the VA.
MPR Violations: Common issues like roof damage, electrical problems, or inadequate access to the property can prevent it from meeting MPRs. These must be resolved before the loan can close.
Market Conditions: In a rapidly changing real estate market, comparable home sales may not accurately reflect the current market value, leading to appraisal discrepancies.

How to Prepare for a VA Appraisal

Both buyers and sellers can take steps to ensure the VA appraisal goes smoothly:

For Buyers:

Choose a Qualified Real Estate Agent: Work with an agent experienced in VA loans who can help you find homes likely to meet VA standards.
Order a Home Inspection: While not required, a home inspection can identify potential issues that might affect the VA appraisal.

For Sellers:

Address MPR Issues: Before listing the home, ensure it meets basic VA standards to avoid delays during the appraisal process.
Provide Access: Make sure the appraiser can easily access all areas of the property, including attics, basements, and exterior structures.

Reconsideration of Value (ROV)

If the VA appraisal comes in lower than expected, borrowers have the option to request a Reconsideration of Value (ROV). This process involves submitting additional information or comparable sales data to the VA in an effort to adjust the appraised value.

Steps to Request an ROV:

Collect New Evidence: Gather recent comparable sales or provide information on home improvements that may not have been considered in the initial appraisal.
Submit the Request: Work with your lender to submit the ROV request to the VA. This typically involves a formal letter outlining the reasons for reconsideration.
Await the VA’s Decision: The VA will review the request and either adjust the appraisal value or maintain the original value.

VA Appraisal Fees and Timelines

The cost of a VA appraisal varies by region but typically ranges between $400 and $700. The VA sets maximum allowable fees, which can be reviewed on the VA’s website.

Average Timelines:

Order to Completion: The appraisal process usually takes 10 to 14 days from the time the lender orders it to the completion of the report.
Repair Time: If repairs are required, additional time will be needed to complete them and obtain a re-inspection.

What Happens After the VA Appraisal?

Once the appraisal is complete and any required repairs are made, the loan can proceed to underwriting. The underwriter will review all documentation, including the appraisal report, to ensure the loan meets VA guidelines.

Possible Outcomes:

Clear to Close: If everything is in order, the lender will issue a “clear to close,” allowing the loan to move forward to closing.
Loan Denial: If the appraisal value is too low or significant repairs are required and cannot be resolved, the loan may be denied.

Tips for Success with VA Appraisals

To ensure a smooth VA appraisal process, consider the following tips:

Work with VA-Savvy Professionals: Choose a lender and real estate agent with experience in VA loans and appraisals.
Understand MPRs: Familiarize yourself with VA Minimum Property Requirements to avoid surprises during the appraisal.
Be Proactive with Repairs: Address any potential issues before the appraisal to prevent delays.

Conclusion

The VA appraisal is a crucial step in the VA loan process, designed to protect both the veteran borrower and the lender. By ensuring the property is valued correctly and meets minimum standards, the VA appraisal helps veterans make informed decisions and secure safe, sound homes.

Understanding the intricacies of the VA appraisal process, from the initial property assessment to dealing with potential challenges, is essential for any veteran looking to utilize their VA loan benefits. With the right preparation and guidance, veterans can navigate the appraisal process smoothly, paving the way to successful homeownership.