Can a HUD Appraisal Substitute for a VA Appraisal?
One of the most important steps in a VA home loan is getting the property appraised so that a Notice of Value or NOV can be issued. The NOV helps determine the loan amount–the VA won’t guarantee a loan for more than the property is worth (plus fees, closing costs and energy efficient improvements as allowed by VA guidelines), even if the asking price is higher.
In these cases the buyer must make up the difference between the asking price and the amount the VA will approve. The higher asking price isn’t an automatic roadblock to getting a VA loan–the real issue here is whether the buyer can renegotiate the price or come up with the difference.
Getting the Notice of Value costs money–the buyer has to pay for the VA appraiser to look over the property. But what if the property has already been appraised by the Department of Housing and Urban Development? Can a HUD appraisal stand in for the VA appraisal?
The VA generally does not allow this practice, but there is one exception–the Department of Veterans Affairs does want to help vets save money and WILL allow a HUD appraisal to be used if certain conditions are met. Those conditions are numerous, and include a requirement that the HUD inspector also be a member of the VA panel. The HUD appraiser cannot be a staff member of the lender, and the property must be individually appraised as opposed to being part of a larger “master” appraisal.
The VA also requires there to be a “legitimate need” for the HUD appraisal to be considered for use as a VA value determination. According to the VA lender’s handbook, the requirement is for “a legitimate need to change to VA financing after the appraisal was made. That is, the buyer changed from HUD to VA financing while under contract, or the property is being purchased with VA financing after a contract with a previous buyer requiring HUD financing fell through.”
The VA requires the situation to meet ALL the conditions spelled out for approval to convert the HUD appraisal to a VA appraisal. If even one of the requirements cannot be met, a new VA appraisal must be carried out. The Department of Veterans Affairs has the final say in what meets the requirements and what doesn’t.