Table of Contents
When you need to borrow money to purchase a home, the lender will seek an independent evaluation of the property’s value, also called an appraisal. This is required for all types of home loans, including the VA loan.
But the VA appraisal process is often different from what’s involved with appraisals for other types of mortgage financing.
Learn more about how the VA appraisal works, ways it is different from conventional, FHA, and USDA loan appraisals, how a VA appraiser is selected, what to anticipate during a VA appraisal, and how the appraisal findings impact you.
The VA appraisal explained
It’s important to know the fair market value of a property before you buy it. That’s why mortgage lenders require having a home appraised before lending borrowers money for a loan: Considering that the home serves as collateral for the loan, they want to ensure that you don’t overborrow.
So they order an appraisal, which is an impartial evaluation of a property’s worth conducted by a professional appraiser.
“An appraiser focuses on the valuation of the property, including the size, bedroom count, home features like views and swimming pools, and the overall marketability of the property,” explains Faramarz Moeen-Ziai, branch manager for CrossCountry Mortgage.
“The appraiser also looks at similar homes that sold in the subject neighborhood over the last six months and compares those houses to the property you want to purchase. This evaluation results in an estimate of value that needs to be at the same price as the sale price or higher. If the appraisal value comes in below the sale price, the veteran will have to come in with additional funds to make up the difference if they are targeting a zero down payment VA loan.”
The lender also relies on the appraisal to help determine what interest rate they will charge, what down payment will be required, and if you will ultimately be approved for the loan.
It’s not the same as a home inspection
A home inspection is conducted by a home inspector – typically someone with general contractor experience.
“A home inspection is a detailed evaluation of the home that takes a closer look at everything from the foundation to the roof, including electrical and plumbing,” Moeen-Ziai continues. “An appraiser does not get into the level of detail that a home inspector would.”
Many buyers opt to have a home professionally inspected to check for flaws, defects, and hidden problems. A home inspection is not required by the lender, but many buyers include a home inspection contingency in the real estate contract to safeguard their interests.
» MORE: See today’s refinance rates
How the VA appraisal is different
Borrowers pursuing VA loans must have an appraisal completed to secure loan approval. But the VA appraisal process can be different and often more involved than appraisals for a conventional loan or other types of home financing.
First, understand that VA appraisals have minimum property requirements (MPRs) that are more strict than other types of appraisals. These MPRs protect VA borrowers and ensure they are getting properties in good condition that will not pose an undue burden to them financially.
“MPRs require the appraiser to look at the roof, make sure the basement is dry, ensure that basic things like electrical and plumbing are in working order, and check that the home is generally in good, livable condition. Other loans do not have MPR requirements and don’t require a look into the attic and basement,” says Moeen Ziai.
Unlike nearly all other loan products, VA loans require clearance of a pest inspection done by a certified pest remediation company, as well.
“A VA loan requires clearing of all section 1 items – which covers live organisms like mold, mildew, dry rot, beetles, termites, rats, etcetera – before closing on the home purchase,” says Moeen-Ziai. “This frequently becomes a point of negotiation regarding who will pay for this remediation. The seller doesn’t want to spend more money on a home that they are selling, and the veteran doesn’t want to spend money on a home they don’t own yet. As a result, many VA buyers are left looking for homes that have section 1 clearance, which can be challenging in markets with older homes.”
Also, “a property to be purchased by a VA loan cannot have flaking paint that may contain lead,” cautions Jason Gelios, a Realtor who specializes in representing veterans.
Other ways a VA appraisal is different
The VA approval process can be slightly more lengthy, too, because a VA appraiser is entitled to 10 business days to conduct their analysis and submit their appraisal report to the lender.
“For other mortgage loans, it’s possible to get this completed more quickly,” notes Bethany Stalder, a Realtor and owner of Fidelis Property Group. “For example, you can order a rush appraisal for a conventional loan, but the 10 business days can’t be accelerated or waived for a VA appraisal.”
Additionally, VA appraisals tend to cost a little more than FHA and conventional appraisals, according to Ben Goodwin, collateral manager for Churchill Mortgage.
“VA appraisals are only facilitated through the VA’s portal and can only be completed by appraisers certified by the US Department of Veterans Affairs. Although pricing is higher for VA appraisal reports, 100% of the fee is paid to the VA appraiser, creating an incentive for them to prioritize these orders over conventional or FHA appraisals. Consequently, this has resulted in faster turn times than expected, as appraisers will prioritize higher-paying jobs,” he says.
Note that VA loan borrowers are not permitted to waive their right to an appraisal contingency.
“With conventional loans, you could elect to waive an appraisal contingency in your offer to make it more attractive to the seller – meaning that, if the sales price is determined to be higher than the appraised value of the home, you have no right to renegotiate the sales price later. Here, if the home appraises for less than the sales price, you must pay the difference in cash at settlement,” Stalder adds. “VA borrowers aren’t allowed to waive this contingency.”
How the VA appraiser is chosen
As with other types of mortgage loans, borrowers never get to choose who appraises the property. The lender will order the appraisal, and you, the borrower, will pay for the appraisal as part of the loan financing.
“After the financial crisis of 2008, one of the precautions put in place was essentially a firewall between lenders and appraisers. Now, when the buyer and lender order the appraisal, that order gets sent to a panel of qualified appraisers and neither the buyer or lender has any direct influence over which one accepts the job,” Stalder notes. “This is meant to ensure that the appraisal is truly independent and home values are not artificially inflated based on a buyer or lender’s influence on the appraiser.”
What to expect during a VA appraisal
The appraisal process usually begins relatively quickly once signed disclosures are received. It’s in the lender’s best interest to initiate the appraisal as soon as possible to allow for any unforeseen delays and to address any problems that may arise along the way.
The appraiser will work with the listing agent to schedule an in-person visit to the property. The actual on-site visit usually takes around 30 to 60 minutes, depending on the property’s size.
VA appraiser must complete several key tasks, including:
- Visit the home in person and take photos to confirm their visit.
- Verify the size of the home by taking measurements. “Sometimes, the physical condition of a property won’t match the listing or the tax record, so it’s important for the appraiser to validate the home that’s actually going to convey to the buyer,” explains Stalder.
- Pay attention to the MPRs specified in the VA handbook. “A head and shoulders inspection of the attic and crawlspace are required to check for leaks, damage, and defects, and the distances between well and septic are measured to check that they meet requirements, ensuring potable water is not contaminated. The appraiser also often tests the functions of major systems, including HVAC, plumbing, and electrical, and tests a sample of the fixtures,” says Goodwin.
- Look for any recent updates that could increase the property’s value.
- Review comps. “This expert will gather information on comparable properties that have sold in the last 90 days in that area and which are similar in amenities and size. They will assess various data on the property for sale, too,” says Gelios.
- Submit a written appraisal report to the lender within 10 business days of accepting the appraisal order.
Once you have signed a contract with the home seller, you (the buyer) typically receive your appraisal results within 15 to 21 days later, per Stalder.
How the VA appraisal can affect you
Upon receiving the appraisal report, it is crucial to thoroughly examine its contents, especially if the determined value does not align with your perceived worth of the property. If you are planning to close with 100% financing but the appraisal report comes in with a lower valuation than expected, you’ll have to pay the difference at closing.
“In addition, be prepared that the MPRs checked by the appraiser could result in extra requirements that you’ll have to renegotiate with the seller,” says Moeen-Ziai. “This is a challenge, but not necessarily a bad thing because the goal of these more stringent requirements is to protect you, the veteran, from making a regretful purchase.”
According to the Federal Deposit Insurance Corporation (FDIC), there may be instances where the appraisal contains errors, omits significant information, or includes potentially biased details that could influence the final valuation. That’s why it’s essential to carefully review the appraisal report.
You can request a reassessment by the lender due to inaccuracies you spot. If so, gather and present factual information addressing specific concerns. This information may encompass items such as a plat map to rectify lot size discrepancies, measurements of your home for accurate total square footage, photographic evidence of interior and exterior updates or improvements, along with receipts for materials and labor to accurately represent the property’s condition.
Additionally, providing a list of comparable homes near your property that have sold in the past 12 months, including corresponding sales prices, can offer more reasonable benchmarks than those used in the initial valuation.