VA Appraisals, NOV Expiration Dates and Appraisal Fees
In past blog posts we’ve discussed the role of the appraisal in buying a home with a VA-insured mortgage. The Department of Veterans Affairs won’t issue a loan amount until VA appraiser has reviewed the property and a Notice of Value (NOV) has been issued to establish the fair market value of the property.
VA rules allow the lender to charge the borrower for this appraisal as it’s a typical cost of doing business when purchasing a home. VA rules cover how much can be charged (the appraisal fee must be reasonable and customary according to typical charges for similar services in the market), how long it takes to process the NOV and how long the NOV remains applicable.
The effective length of an NOV depends on the type of property. VA rules state, “A notice of value for property appraised as existing or new construction is valid for six months,” but adds that changing market conditions may require the use of a shorter validity period.
But what happens to the NOV when a borrower decides not to purchase the home after paying for an appraisal?
According to VA rules, the NOV remains in effect until the expiration date, which means a new borrower can come along and use the current VA NOV and not pay for a new appraisal. In fact, the Department of Veterans Affairs has strict rules covering duplicate charges or fees for services already rendered. A borrower cannot be asked to pay for a service connected with a VA loan application which has already been rendered.
The VA official site puts it plainly: “…The borrower may not pay a duplicate fee for services that have already been paid for by another party. Examples: An appraisal is completed on a property and paid for by a prospective purchaser, but the sale is never completed. A second purchaser applies for a loan before the validity period of the Notice of Value (NOV) expires. The lender uses the same NOV. The lender may not charge the second purchaser an appraisal fee if no second appraisal is ordered.”
A borrower is protected under VA loan rules against this sort of practice, but it’s important to remember that in the case of the Notice of Value, a NOV expiration date does exist. The NOV may be good in the early stages of the VA loan process, but how soon until it expires? How long do you have and under what conditions could you be required to pay for a new VA appraisal?
What may appear to be a double charge could be a legal, required fee if the NOV were to expire before the borrower can take advantage of it. Changing market conditions may warrant a date than those on the books as typical VA NOV expiration times, so it’s wrong to assume you have a full six months (or other applicable time frame).
Check with the lender and with the VA if you aren’t sure how long you’ve got to decide on the property before the current NOV expires.