One of the most tangible and valuable benefits available to those who opt to serve their country through military service is the VA home loan program. And while every homebuying process is a journey from browsing for homes to the closing table, the VA has some requirements unique to its program that are intended to protect the borrower and ensure a sound investment.
This protection is offered in the form of the VA loan appraisal, a process by which an approved appraiser establishes the market value and assesses the condition of a property. This evaluation is different than a traditional home inspection, and the VA’s standards will differ slightly from the appraisal requirements that a borrower would find through other home loan programs.
What Is a VA Loan Appraisal?
A VA loan appraisal is an estimate of a property’s market value and is conducted by a VA-approved appraiser, ensuring that the property qualifies for the requested loan amount. A property must also meet a list of standards set by the VA, called Minimum Property Requirements (MPRs). This appraisal process is required by the Department of Veterans Affairs for all VA home loans and cash-out refinances.
A VA loan appraisal will also ensure that the home is a sound investment and safe and livable when a buyer takes possession.
Differences Between VA Appraisals and Home Inspections
A borrower may be confused between the VA appraisal process and the protections offered by a traditional home inspection. While there is surely some overlap in what a VA appraiser will look for in the effort to ensure livability and fair market value, a home inspector takes an even deeper dive into every aspect of the home and its systems to find and flag potential problems before the purchase is finalized.
Another item to note is that while a VA appraisal is required to secure a VA home loan, a home inspection is optional under the program. Therefore, it’s important to understand what’s covered by each assessment and where you might be vulnerable should you forgo the home inspection.
Again, the VA appraisal will assess the property for a select list of requirements to ensure it is safe, sanitary, livable and a sound investment for the buyer. But passing and conforming to these minimum property guidelines as set by the VA only covers certain categories, meaning a buyer may still be vulnerable to a variety of other issues.
But for a very modest cost, a home inspector takes an in-depth look at all aspects of the home, searching and testing for existing and potential problems in the most important systems and components such as the structure, wiring, plumbing, HVAC, roof, drainage, and more.
Why Does the VA Require an Appraisal?
The appraisal process is necessary for VA home loans because it ensures the homebuyer is making a sound investment in a property that isn’t overpriced or in need of significant repairs. The process also ensures the Department of Veterans Affairs is backing a loan that does not exceed the property’s market value. In other words, the appraisal is meant to protect and safeguard the interests of both the borrower and the loan guarantor (the VA).
Minimum Property Requirements (MPRs) For VA Appraisals
So, what will a VA-approved appraiser look for when assessing a property? The VA has established a list of Minimum Property Requirements (see the list here) that appraisers must review to make sure a property is safe, structurally sound and sanitary, among other considerations. The MPRs cover each of the following aspects of a property’s interior and exterior:
An appraiser will ensure a qualifying property includes year-round street access to the home and be safely accessible without the need to pass through neighboring properties. Private roads must be managed by a homeowner’s association and include a permanent easement. Finally, no part of the property can encroach on another property, including secondary buildings like garages or sheds.
Qualifying properties will offer enough functional space for day-to-day living, such as room to sleep, cook, dine, plus suitable bathroom facilities.
The appraiser will take a close look at the home’s electrical system, checking for damaged or poor wiring, while also ensuring there’s a sufficient electrical supply for powered equipment, lights and appliances.
Heating and Cooling Systems
In some regions of the country, it may not be required for a property to have a system that both heats and cools, as air conditioning is sometimes considered optional. If there are heating and cooling systems in place, the appraiser will check to make the system is functional and able to heat and/or cool the entire home and maintain an adequate temperature.
Every qualifying property will offer year-round access to a safe and potable water supply for drinking and bathing, as well as a working means of sewage disposal and a functional water heater. Use of public water isn’t required, but all private wells/water supplies will be tested to ensure they meet or exceed water quality standards.
The assessment will check for proper drainage to ensure that rain water is able to drain away from the foundation, and that water isn’t pooling or retained on the property.
A roof must be in sound condition, able to prevent leaks and to offer “reasonable future utility,” meaning it is not so old that it is in need of immediate replacement. A roof with old or worn shingles may require a letter submitted by a contractor to confirm that the roof can serve for another three or more years. The appraiser will also check for defects, holes, missing shingles, or sloppy repair work.
An assessment of an attic will include checks for ease of access, proper ventilation, structural integrity, pest activity, mold, mildew, water damage, and other debris or hazards.
In the basement, an appraiser will look for ease of access and signs of dampness and structural defects.
An appraiser will assess the safety and working condition of the home’s mechanical systems – for example, its heating, cooling, ventilation, plumbing and electrical systems -- while also noting the need for repairs that are readily apparent.
Health and Safety Hazards
A property that contains any threat to physical health or safety, or any hazard that could impact the property’s structural soundness is unlikely to qualify for a VA loan. Red flags include the presence of radon gas, asbestos or lead-based paint within the home, or properties located in a flood zone, near a sinkhole, or proximity to any type of environmental contamination.
Termites & Pest Inspection
The presence of termites or other pests can bring serious damage to include structural issues. Appraisers will look for the presence of pests and must report any infestation, fungus growth or dry rot that could make the home less stable or put its occupants in harm’s way.
Common VA Appraisal Problems
For many potential buyers, the VA appraisal process can end with bad news: For one or more reasons, the property didn’t earn a passing grade. The two most common reasons for a property to fail a VA appraisal is that it doesn’t meet one or more of the VA’s Minimum Property Requirements or the appraiser’s valuation of the property was low enough that it isn’t worth what a buyer has offered to pay for it.
Depending on the reason for the appraisal’s failure, however, a buyer may still have options for landing the home and a VA loan.
For starters, if the home can’t meet one or more of the MPRs, you might request that the seller makes repairs or changes to the item(s) in question in order to bring the property up to VA standards.
If the appraiser’s valuation for the property is lower than what you have offered to pay, you will also have some options. First, you can pay the difference in cash between the appraiser’s valuation and the seller’s asking price, a figure known as the appraisal gap. This decision most likely means you will be paying more for the home than it is worth.
If paying cash to close the appraisal gap isn’t an option, you can ask the seller to lower the asking price so it is in line with the appraiser’s valuation and the property’s fair market value. If the seller agrees to the price decrease, the loan process can move forward.
One final option for working past a low valuation is to challenge the appraisal with the request for a Reconsideration of Value (ROV). To start this process, your real estate agent will provide market data to your lender showing the home is worth more than the appraiser’s valuation. VA personnel then review the appraiser’s valuation and the new data. If you can demonstrate that the property is worth more than the valuation, the VA will then issue an amended notice of value and the loan process can resume.
Compiling data for an ROV is one good example of why it’s a smart idea to work with a real estate agent when shopping for a home. Seek out agents who are familiar with the VA loan process and understand the standards of the VA’s Minimum Property Requirements. This type of experience might help you spot potential problem properties before you waste any time and money on the appraisal process.
VA Loan Appraisal Fees
As with most appraisals or inspections, the burden of cost belongs to the buyer. What’s more, VA appraisal fees are typically higher than appraisal fees for other loan types because the appraiser must know the VA’s distinct criteria. Expect to pay as much as $1,000 or more, depending on the location of and type of property.
VA Appraisal FAQs
The buyer is responsible for paying the VA loan appraisal fee, a step that takes place as soon as your lender orders the appraisal. If the home fails the appraisal and you don’t end up making the purchase, you will still be responsible for the fee.
A typical wait time for a VA loan appraisal on a single-family home is two weeks, but the timeline can vary based on the location of the property or market activity. Properties such as multi-unit complexes or duplexes may require more challenging appraisals and could further delay the wait time.
An appraisal is mandatory for all VA home loans and cash-out refinances, even if you’re refinancing an existing VA loan. Homeowners interested in a VA interest rate reduction refinance loan (IRRRL) do not need an appraisal because only VA-financed homes (with an approved appraisal) would qualify for the IRRRL.
The VA appraisal and its minimum property requirements are quite extensive, and the assessment can be more difficult when compared with other loan programs. But, in the end, the process will ensure that the home is move-in ready and a solid investment for the buyer.
About The Author
Craig Richardson is a military veteran who started his journalism career while serving in the Navy. Following overseas deployments to the Med and Middle East, including service in Operation Desert Storm, he left for the private sector but continued with journalism. He has worked for several publishers and news organizations over nearly 30 years and continued to cover stories with ties to veterans and military affairs throughout his career.
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