One of the most dreaded responses a loan officer or real estate agent can receive from an appraiser is that the home requires repair to pass the VA’s minimum property requirements (MPRs). While the purpose of MPRs is to protect the buyer and ensure the home is safe, structurally sound and sanitary, there’s no doubt that this news can be frustrating.
The best way to prepare your clients is to be a VA-savvy agent and guide them in the direction of a sound home. Reduce confusion by working with an experienced VA lender that can also guide them through the VA loan process.
By becoming an expert on VA appraisal and VA property requirements, you can reduce the number of times this happens, but it’s not likely you will be able to catch it every single time. Occasionally the repairs are as simple as placing a cap on an exposed wire. But there are other times where repairs can be extensive.
Become familiar with the VA’s minimum property requirements so that you can avoid as many of these situations as possible. When they do arise, you have to deal with it, or the loan won’t close. Here's a step-by-step guide to lead you through an appraisal repair, so that you have the best opportunity to still get the loan closed.
The buyer’s loan officer should inform you of what items require repair, but it’s always best to get your eyes on the appraisal yourself. This way you can see exactly what the appraiser says, and if they give any helpful hints regarding what would be an acceptable repair. You should also double check the appraisal to make sure the loan officer didn't miss anything regarding repairs.
This seems simple, but list out each repair. Bullet points, hand-written or on your phone, whatever your note taking style, have a list you can reference throughout the process. I recommend lists because it’s easy to get laser focused on one big issue and forget to resolve another minor one. You want to ensure that once the appraiser comes back to conduct the reinspection, they will find every single thing repaired. In general, each time the appraiser comes to the property, the buyer is charged, so if you can limit the number of contacts the appraiser has with the home you can keep costs down for your client and help speed up the process.
See if the loan officer has received any communications from the appraiser and get clarification on anything you find confusing. The loan officer may have some tips or suggestions on the best way to deal with a certain MPR if it’s something they've run into before. This is also a great time to get clarification on who can and can’t pay for the cost of specific repairs and a list of what documentation you will need to provide.
Once you have a clear understanding of what repairs are needed and who can or must pay for them you need to communicate with your buyer and the seller’s agent. Outline clearly item by item what repairs are necessary. Make sure to clearly outline what documentation will be required for each repair, whether it be receipts, invoices or reports. Not having all the documentation you need can really slow down a closing. Work as a team and include the loan officer in these discussions to provide clarification when necessary.
Coordinate with the seller’s agent to get repairs scheduled and a time frame on completion. Communicate these time frames with the loan officer and buyer. Discuss with all parties if the closing date will have to be changed. If the repairs go past the scheduled time frame, make sure the seller’s agent understands that this could delay closing. Keeping communication lines open and adjusting expectations as needed will keep everyone on the same page and hopefully assist in avoiding unnecessary confrontations.
In most cases, if a repair is required on a property for the home to meet the VA’s MPRs, then the VA has determined that this cost can’t be paid for by the buyer. There are some exceptions here, so make sure to communicate with the loan officer regarding the repairs specific to your appraisal.
Regardless of who handles the expense, you will likely have to provide documentation showing who paid for the repairs, who conducted the repairs (and their licensing status if necessary), what was repaired and the cost. This can range between a pile of receipts from the local hardware store along with a letter of explanation on how the homeowner made the repair themselves to a detailed invoice from a licensed contractor or engineer.
Make sure that when you submit the documentation it’s very clear, legible and all pages are included. I’d hate for you to run into a situation where you provided everything, but the underwriter can’t read it or it’s missing a page and the closing gets pushed back in order for the loan officer to obtain a clearer or complete copy.
Once all repairs have been completed and documentation has been compiled, the loan officer will schedule a reinspection. At that time the appraiser will go back out to the property and confirm that the repairs have been made satisfactorily.
I know that even getting a seller to agree to repairs can be difficult, but here is a great opportunity for you to make sure they are aware of the fact that this buyer is a veteran or active duty service member and that they've earned this home loan benefit by protecting our country. And with a little guidance from the loan officer and this article you should be on your way to closing in no time.
If you have any questions please don't hesitate to email me directly at firstname.lastname@example.org.