The VA Appraisal - Page 1 of 2

So you’ve found the perfect home for you and your family. Your offer has been accepted and your loan has been preapproved. Smooth sailing from here, right?

Perhaps. Each property up for VA loan consideration must also undergo a VA appraisal.

The VA appraisal is not just a drive-by glance at your property. It’s a thorough look at a home’s condition and value that puts a premium on health and safety. Problems are often discovered by appraisers that must be addressed before a loan can close. This process is especially important for veterans looking to purchase foreclosures, short sales and other properties that may have fallen into disrepair.

Homes that don’t immediately meet VA conditions can still be approved for financing, but not without renegotiation (and a bit of luck). Give yourself a good shot at a trouble-free home purchase by getting an understanding of the VA appraisal process and what it means for potential homebuyers.

Main Purposes of a VA Appraisal

The VA appraisal has two primary objectives: ensuring that the property measures up to the VA’s Minimum Property Requirements (MPRs) and establishing the property’s monetary value. Let’s take a closer look at how the VA appraisal accomplishes these goals.

Who is your appraiser?

VA appraisers are not affiliated with or employed by your lender. These individuals are independently licensed and approved by the VA. After your appraisal is ordered, the VA regional loan center nearest you will randomly assign a VA approved appraiser to your case. The appraisal process is set up this way to be sure the appraiser is an objective party with no interest in the transaction. That means the appraised value will be fair and unbiased.

Appraisals v. Inspections

Don’t confuse the VA appraisal with a professional home inspection. A home inspection is a much more exhaustive examination of a property that can reveal significant issues. Buyers, who pay for home inspections, can use the findings to renegotiate the terms or purchase price of the contract. Home inspections aren’t mandatory, but they are strongly suggested.

Purpose 1: Ensure compliance with MPRs

The VA’s Minimum Property Requirements serve as universal screening guidelines for VA appraisers. Although military buyers can find MPRs annoying at times, their purpose is to ensure those who serve purchase safe and structurally sound properties.

Homes must be what the VA considers “move-in ready,” meaning that caved-in ceilings or rotten flooring are definite deal-breakers unless fixed prior to closing. Veterans need homes in good repair, not dicey money pits. Costly surprises can put a military buyer’s finances at risk and make mortgage payments more difficult. The VA appraisal seeks to eliminate shoddy homes from contention through a comprehensive review of each property. In pursuit of that goal, MPRs cover a wide variety of home characteristics. Appraisers will scrutinize the tiniest crawl space and scale the tallest roof to make sure conditions are acceptable.

Here’s a summary of what your VA appraiser will be looking for:

  • Functional mechanical systems: Electrical and plumbing systems must be in good repair and have some usable life remaining.
  • Adequate heating: The home’s heating system must be safe and adequate and able to maintain a temperature of at least 50 degrees Fahrenheit to prevent pipes from freezing.
  • Adequate roofing: The roof must be in good condition and without any major defects.
  • Dry basements/crawl spaces: Basement leaks must be corrected for VA approval.
  • Free of hazards and defective conditions: A toxic landfill on the property or poor workmanship can eliminate homes from VA contention. Faulty support beams, exposed wires or stairs without proper railings can also be considered hazardous by a VA appraiser.
  • No wood-destroying insects: If you live in a pest-prone area, the VA may require a termite inspection. Properties with termite infestations must be treated and re-evaluated to garner VA approval.
  • No lead-based paint: Properties built before 1978 must be inspected for lead-based paint. Surfaces with cracked or chipped lead-based paint must be scraped and repainted, covered with drywall, or totally removed.

Purpose 2: Establish property value

The appraisal also places a tangible value on a property. This value helps lenders determine how much they should loan toward a purchase and helps buyers verify the home is worth the price they are paying. Lenders will loan the lesser of the purchase price or the appraised value.

Appraisers will look at the sales of three comparable homes, otherwise known as “comps,” to arrive at a fair market value for your property. Value is added or subtracted from your property depending on how it stacks up against the comps.

When you're eager to move into your new home and anxious about your mortgage approval, it's important to keep in mind that a fair, accurate and objective appraised value protects you from purchasing a home for more than it's worth.

Rules that must be followed by VA appraisers:

  • VA appraisers must use a “sales comparison” approach rather than a “cost-based” approach in calculating appraisal value. The cost of building or replacing the home has no bearing on the appraisal value.
  • Only completed sales can be used as comps for the purposes of the VA appraisal. Sales listings, contract offers and unsettled sales don’t qualify.
  • Comps should reflect a relatively narrow price range. So if you’re buying a $175,000 home, the appraiser should rely on comps that are similarly priced rather than extrapolating from multimillion dollar properties.
  • Comps should have been sold less than 12 months ago and ideally less than six months ago.
  • Comps should be closely located to the appraised property

The Appraisal Report

The appraiser will compose a thorough report for your lender to review. The appraisal and report should ideally be completed within a couple of weeks of signing the purchase agreement on the home. Lenders will order the appraisal.

VA buyers will need to pay for an appraisal upfront. Appraisal fees are set by the VA and vary depending on the state of purchase. Plan on needing about $500 to pay for the appraisal. You may be able to recoup this fee at closing from the seller as part of your closing cost negotiations.

The appraisal report will include a variety of details about your property, including maps, photos and sketches of each floor. The most significant part of the report explains the value calculation and lists the repairs needed to bring the home up to VA standards.

Call 800-884-5560 to speak with one of our VA mortgage specialists, or Get Started Now
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