So you’ve been hired to appraise a property for a veteran using their VA loan, but you aren’t sure how this appraisal differs from a standard one. You’re in the right place!
While VA appraisals follow the same process as a standard property appraisal, there are a few details appraisers can look out for, namely MRPs. M-R-What, you may ask?
Let’s break it down!
What Does a VA Appraisal Entail?
Like a standard property appraisal, VA Appraisals aim to determine a fair market value for a property. They also ensure that the property meets the minimum property requirements (MRPs) set by the US Department of Veterans Affairs.
MRPs are intended to ensure that the investment is safe, sound, and sanitary. These requirements include:
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Property must be a single and marketable entity
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Property must have adequate space provided for living, sleeping, cooking, and other facilities
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Property must be graded to properly drain water away from the walls
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Property must not be subject to regular flooding
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Property must comply with local residential zoning ordinances
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Living units must have electricity and the necessary corresponding equipment
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Property must have safe, potable water for consumption and sanitary purposes
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Heating is required in most climates, but air conditioning is not required
Because of the extensive details that go into verifying these requirements, this part of the appraisal typically takes no less than a week to accomplish. These requirements' main purpose is to ensure the safety, soundness, and sanitation of the living space.
This doesn’t, however, guarantee that any home that undergoes a VA appraisal will be without its flaws. And of course, this appraisal process is still not the same as having a home inspection done on a property. To get the most thorough understanding of a home’s condition in addition to its value, it’s important for homebuyers to have both done.
A Glimpse at the VA Appraisal Process
Now that we’ve dusted off the rule book, let’s dive into the assignment itself.
First, the buyer will owe an appraisal fee, which depends on a number of property factors. From there, it’s standard for this appraisal to take at minimum a week, but more likely it will take 10 to 21 days to complete. Of course, turn times can depend on a lot of factors, including the size and location of the property.
It’s also important to keep in mind that there are timeliness requirements for VA appraisal work, which vary by state and region.
What Happens If MPRs Aren’t Met
If any MPRs aren’t met, and the home isn’t up to standard for the VA, you may require repairs be made to correct issues, where applicable. Buyers can negotiate with the sellers to make these repairs, or offer to pay for the repairs on their own. If none of these options are doable, it may be time for the buyer to look for a different home.
What Happens With a Low VA Appraisal
Sometimes, an appraisal assignment will yield different results than what your clients are hoping for. In cases like these, VA buyers can try to appeal the low appraisal in a couple of ways.
VA Tidewater Policy
During the appraisal process, VA program participants, by way of their lenders and agents, have the chance to provide additional comparable home sales (“comps”) to support the contract price of a home. To do this, they use the Tidewater process.
Put simply, if it seems the home value will come in below the purchase price, you can give the lender a heads-up, invoking the “Tidewater Initiative.” The lender has two days to come up with additional comps that support the purchase price.
If the new comps don’t help to increase the home value, you’ll have to back up the results in writing. Once this lower value is made official (called the final Notice of Value or NOV), buyers have the chance to appeal it, via a Reconsideration of Value (ROV).
VA Loan Reconsideration of Value (ROV)
On the behalf of the buyer, the lender can request an ROV, which is a chance for the buyer and their lenders/agents to scrutinize your report for mistakes, old comps, or other issues with the data. At this point, the final decision will be up to the VA to determine whether or not the final value is too low.
Unfortunately, you won’t always be able to prevent situations like these from happening. This is the nature of appraisal work — not everyone will be satisfied with your results all the time. This is just another reason why it’s best practice to be as thorough as possible when conducting your research and filling out your appraisal report. Always include the most relevant data possible.
Stay Ahead of the Appraisal Game
The most challenging part of taking VA appraisal assignments is getting familiar with the MRPs. These requirements are extensive and detailed, but the better you know them, the more smoothly these assignments will go. And, as always, mistakes happen. That’s why it’s crucial to have a solid foundation in your appraisal education, so that you can be prepared for any curveball that comes your way.
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