For the most part, appraisals are appraisals – a third party will come in to take a look at the property you are buying, compare it to others, and while you bite your nails, they determine a value. That can be said for VA appraisals as well; however, there are some nuances that do make VA appraisals different. Read on to discover what they are.
How a VA Appraisal is Ordered
The differences start with the ordering process. VA appraisals are not ordered directly from the appraiser like they are in the conventional loan process. The lender must order the appraisal through the ‘VA Portal.’ At that point, an appraiser who’s approved with the local VA office is randomly assigned the job. The lender must provide the fully executed purchase contract (with all addendums and counteroffers) before the appraisal is started.
VA Appraisal for Condos
For condos, the lender must provide the following condo documents before the appraiser can start:
2019 Update! Read Condo Docs Will No Longer Delay VA Appraisals for information about the flexibility of the submission of condo docs and the completion of VA appraisals.
- Meeting Minutes
- Condo Disclosures
The appraiser then has five business days to inspect the property (assuming cooperating parties can provide access within that time-frame) and another five days to complete the report. Once completed, the appraisal is uploaded into the VA Portal where the appropriate party can review it.
The Review Process
As far as reviewing the appraisal goes, there are two types of lenders, Lender Appraisal Processing Program (LAPP) approved lenders (that’s us!) and non-LAPP approved lenders. A LAPP approved lender has underwriters that have been given the authority by the VA to review the appraisal and issue the Notice of Value (NOV), which is the final determination of the property’s value. If the lender is not LAPP approved, the appraisal goes to the VA for review and issuance of the NOV.
Disputing the Value
One vital difference that can be quite valuable for all parties involved is the rebuttal process. Contrary to some rumors, this process really helps sellers to be treated fairly. If the appraiser knows that the value is going to come in below the purchase price, he will issue a notice along with an indication of the comparable properties he used to make his determination. The notice provides a two business day period for additional evidence to be provided to support the purchase price. Of course, it is the appraiser’s sole discretion that determines his or her result.
We recently came across this exact situation, and it saved the deal. The buyers believed they were getting a fair price, as did the sellers. By providing alternate comps, the appraiser was able to re-evaluate his determination, and provide an appraisal that could supported strongly enough to obtain the NOV and maintain the sale price.
It can be as simple as using a comparable that was an ‘interior’ lot with little view when a more similar lot with a better view would be more representative of the value. Using an ‘interior’ lot would require large adjustments to the value to compare apples to apples, when the use of the other property would not.
How Strict are the VA Appraisers?
Now, because this loan program is designed for veterans, there are safeguards built in to help ensure that they are buying a home that is in good condition. Some have commented that the VA appraisals can be “nit-picky,” but it is all for the benefit of the veteran. For the most part, these little issues can be addressed and solved by the realtors without much fuss.
Chipped paint or a missing closet door, may not seem like something an appraisal should point out, but it also isn’t something that would cause a deal to be thrown away. Things like these will need to be addressed, but in a common sense manner. Chipped paint in a small area will not require the whole house to be repainted. A little perspective and relaxed communication can usually solve any of these problems.
There are also some specific rules about comparable property selection, especially within a condo project. Comparables within the project must be evaluated before those in a different project.
That’s a lot of information to cover, but here at Hawaii VA Loans, we believe that you can never have too much information when making the choice to buy a home here in Hawaii.
To speak with one of our Hawaii VA Loans team members about the VA appraisal process or to see how you qualify for a VA home loan, give us a call at 808-792-4251.