VA appraisals

Why Would the VA Refuse to Appraise a Home for a VA Loan?

November 15, 2010


Why Would the VA Refuse to Appraise a Home for a VA Loan?

The VA appraisal is one of the most important parts of buying a home with a VA mortgage. The appraisal tells the buyer what the property is actually worth (the fair market value) and the buyer can use that value to decide whether the asking price is fair. Once the value of a property is determined, the VA loan process can move forward and the VA loan applicant is a step closer to owning the home if they decide to commit to the purchase.

But there’s an important detail that can stop a home purchase in its tracks.

If certain conditions exist, the VA will not allow the home to be appraised. That effectively disqualifies that particular property from a VA loan. If the buyer discovers the VA won’t allow an appraisal, there can be many reasons why but a large number of them are a definite red flag to the buyer.

There are many things a typical first-time home buyer might not be privy to when they’re searching for a new home; how would a house hunter with no experience discover a property is located in a special flood zone or in a specific type of airport noise zone?

These situations can be very dangerous for a new buyer–dangerous for their investment in the new home as well as the VA’s interest in that home. What types of issues might cause the VA to refuse an appraisal? According to the VA:

–Bad physical condition.
–Located in a condominium unlikely to be approved by VA or HUD prior to loan closing.
–A party of interest to the transaction is excluded from participation in the VA Loan Guaranty program for any reason.
–Located in a Special Flood Hazard Area (SFHA) and:

1) Flood insurance is not available, or
2) Proposed, new or under construction and the elevation of the lowest floor is below the 100 year flood level.

–Subject to regular flooding, whether or not it is in a SFHA.
–Located in a Coastal Barrier Resources System area.
–Proposed or under construction and in an airport Noise Zone 3.
–Any part of the residence is within a transmission line easement for high-pressure gas, liquid petroleum or high voltage electricity.

These are just some of the circumstances that might cause the VA to refuse to appraise a property, but it’s easy to see that the buyer’s interest is definitely what informs many of these decisions.

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