VA appraisals

VA Appraisal Questions and Answers

January 24, 2013

VA Appraisal Questions and Answers

The appraisal process is critical when it’s time to purchase a home with a VA mortgage.

Without the appraisal, there can be no loan approval, so it’s good for borrowers to understand how the VA appraisal system works (and that it is not a replacement for a borrower-initiated home inspection). Here are some common questions and answers about VA appraisals you should know:

Why is a VA Appraisal Required?

The VA Lender’s Handbook, Chapter Ten states, “An appraisal is required to help ensure that any property which will become the security for a VA-guaranteed loan has a value of at least as much as the loan amount, and is in a condition acceptable to VA.”

Who Can/Should Order My VA Appraisal?

The Department of Veterans Affairs says it prefers the lender to make appraisal reuqests, “although it can be requested by any other party to the transaction, provided the appraiser is assigned by VA.”

What Kinds of Property is Eligible for a VA Appraisal?

There are three basic classifications of property the VA will appraise, provided they meet the right criteria. One is “existing construction” which the VA defines as, “A home which has either been previously owner-occupied or had all onsite and offsite improvements fully completed for one year or more is eligible.”

For new construction homes, the VA loan rulebook says, “Newly completed properties (completed less than one year and never owner-occupied) are eligible if either

  • Covered by a one-year VA builder’s warranty
  • Enrolled in a HUD-accepted ten-year insured protection plan, or
  • Built by a veteran, as the general contractor, for his/her own occupancy.”

The VA adds, “An exception may be made for a veteran who wishes to purchase a new home from a builder who is not more than occasionally involved with VA financing and will not provide either a one-year VA builder’s warranty or a ten-year insured protection plan.”

The VA also has a classification for properties which are “proposed or under construction”. The rules for these types of projects includes, “Property is eligible for appraisal prior to construction or during construction, if

  • The appraisal is based on proposed construction exhibits, and
  • The property is inspected by VA or HUD during construction”

Will the VA Appraise a Manufactured Home or Mobile Home?

In general, VA loan rules for these properties includes the following:

“To be eligible for a VA loan term of 30 years, a manufactured home must be

  • Classified and taxed as real property
  • Properly affixed to a permanent foundation (Section 12.10)
  • Substantially conform with VA MPRs (Chapter 12), and
  • Conform with applicable building code and zoning requirements for real estate.”

This is not a complete list of answers for VA loan appraisal questions–we’ll have more to come in another blog post.

Do you have questions about VA home loans? Ask us in the comments section.

 

 

12 Comments
  1. Wesley Scovanner

    I am an eligible veteran and considering using a VA loan to purchase a home. In the standard real estate contract there is a clause that requires the house I am purchasing to appraise equal to or above the contract price. I will have substantial down - nearly 40%. With the past depressed real estate market (now picking up somewhat) there are few "real" comps in my area as most of the recent sales have been Short sales or forced sales. I am concerned that VA NOV may be slighty less than the agreed price but will be well in excess of the VA loan. If the NOV from the VA is less than the contract price but greater than the VA loan, can the loan still be approved?

    • Joe Wallace

      The VA loan amount is dependent on the NOV, so the real issue is whether the borrower wants to proceed with the VA loan if the NOV and VA loan amount are lower than the asking price. The VA loan rulebook has an "escape clause" which says the borrower cannot be forced to close the deal on a VA loan where the NOV is lower than the asking price if the buyer doesn't want to pay the difference out of pocket (which is required in such cases). Hope this helps!

      • C Wilson

        In reference to your statement: "The VA loan rulebook has an “escape clause” which says the borrower cannot be forced to close the deal on a VA loan where the NOV is lower than the asking price if the buyer doesn’t want to pay the difference out of pocket (which is required in such cases)." - Does this rule apply even if the contract says otherwise? In our case, we are attemting to purchase a home from a corporate relocation company, and they required us to use their contract forms. We indicated on the first page of the contract that we are using a VA loan. However their basic contract states that the sale is not contingent on the home appraising for the contract price. We submitted a VA addendum with that Escape Clause with our offer, and they signed the contract but did not sign and/or return the addendum. Are we still protected?

        • Joe Wallace

          The short answer is yes, the VA escape clause applies regardless of whether it is specifically contained in the actual documents you signed. Contact the VA directly at 1-800 827-1000 for assistance should you need it.

  2. Joe Bailey

    I am trying to figure out value placed on partially finished below grade basement. How is value determined and how much would that increase if there was heating and air conditioning vents. Right now it dry with sump pump, window to code, electrical in to code, pluming in for extra bathroom. there is no sheet rock up and has original concrete floor. The house is currently up for sale and an FHA Appraisal valued at 15,000. If I added the heating and air conditioning is there a way I can figure what value this would add for appraisal? We have a VA Loan buyer who has made an offer and we would like to try and get an idea on that value. Because the FHA only valued the 800 sqft basement at 15000 the appraisal came in under contracted sales price and we lost the transaction. We would really like to avoid that in next transaction. I have tried calling local appraisers but can not get any help. PLEASE HELP

    • Joe Wallace

      Sorry, but this is outside our expertise--we can offer advice and information about VA loans, VA loan rules, and appraisal rules, but the valuation of a home or its features is something best left to a trained professional. Have you tried contacting a local real estate agent or contractor to get an opinion?

  3. darrell ross

    I am putting my current VA loan house on the market and plan to build a new one immediately after the sale closes. My question is how long will it take for my certificate of eligibility to be released so I can use it to build the new home? Is it immediate upon closing or is there a 'waiting' period? Thanks

    • Joe Wallace

      Eligibility restoration is not automatic--you must apply for it through the VA and provide proof the original mortgage has been paid off. Essentially you can submit the application with your "paid in full" notice from the lender as soon as you have it in hand.

  4. Shirlene Goff

    I am a real estate agent who is working with a buyer who is trying to obtain a VA Loan on a new construction and the builder does not have a VA builders ID but does have a permit number to build. Please give me any information that is available to help this buyer purchase this property. I do not completely understand the exception rule. Will the builder be required to obtain a VA builders ID. If so, give me steps to follow because the loan originator has given me this task. I feel inadequate since I am an agent and not a loan originator or member of underwriters staff. This is at the stage of an apprasial but can not continue until the required information is furnished. Any help will be greatly appreciated.

    • Joe Wallace

      Have you contacted the Department of Veterans Affairs for assistance? Call them at 1-800 827-1000 for information on the requirements for new construction loans and VA builder IDs.

  5. Stanley Stoklosa

    I just wanted to know when repairs are suggested after an appraisal are there any execption

    • Joe Wallace

      If the repairs are listed in the appraisal as a condition of loan approval, there are generally no exceptions but you can call the VA directly for assistance at 1-800 827-1000.

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