VA appraisals

VA Updates Appraisal Requirements To Include Foreclosed Properties

March 4, 2014

VA Updates Appraisal Requirements To Include Foreclosed Properties


The Department of Veterans Affairs has issued a “re-affirmation” of its appraisal rules to remind borrowers and lenders about the appraisal requirements for foreclosed properties.

According to VA Circular 26-14-5,”This Circular reaffirms Department of Veterans Affairs (VA) policy that all properties, including foreclosed properties, must meet VA minimum property requirements (MPRs) prior to VA loan guaranty. Additionally, this Circular clarifies our current VA requirements on who may pay for repairs on foreclosed properties.”

The VA has issued the circular/update in the wake of recent demand for VA mortgages on foreclosures. “There has been an ongoing interest in the purchase of foreclosed properties by Veterans wishing to use their VA Home Loan Guaranty benefit. VA hereby reaffirms our policies regarding VA MPRs in connection with the purchase of foreclosed properties which are to receive VA loan guaranty.”

Furthermore, “As outlined in Chapter 12 of the VA Lenders Handbook (VA Pamphlet 26-7), VA requires that all properties, including foreclosed properties, be in a condition that meets VA MPRs, or that the property must be repaired to meet the MPRs prior to loan guaranty.”

There are often situations where borrowers who want to purchase a foreclosed property with a VA mortgage are required to make repairs as a condition of loan approval. The VA circular outlines the requirements for these circumstances.

“In those cases where repairs are required, the VA fee appraiser must list on the appraisal report any repairs necessary to meet MPRs, and provide an estimate of the fair market value for the property as if all of those repairs have been completed. The seller or the Veteran may negotiate who and/or how the required repairs included in the estimate of value, as noted in the VA Notice of Value will be paid. If necessary, escrow for the Veteran purchaser may be established to accommodate making the required repairs.”

Complete VA appraisal requirements are found in Chapter 12 of VA Pamphlet 26-7, which is available on the VA official site.

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

  1. Patricia

    if the seller cannot or will not do any repairs on a foreclosed home the veteran with a VA loan is purchasing, and no escrow holdback is possible from the lender, can the veteran state he will cover costs of repair after buying the house, will the VA guaranty the loan still especially if it is being bought below market value and appraised below the the purchase price?

    • Joe Wallace

      If the VA appraisal requires the corrections, they would have to be made as specified in the appraisal report as a condition of loan approval unless the appraiser has specified otherwise in the appraisal report.

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