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Challenging a Low VA Appraisal With a Reconsideration of Value

Purchasing a home is a big decision, often requiring careful consideration of numerous neighborhoods to find the perfect property. It’s easy to become excited about a property, but placing an offer on it can be nerve-wracking as you wait for all of the pieces to come through to close the deal.

A low appraisal can be frustrating, but the VA gives borrowers the option to challenge the initial evaluation.

Can You Challenge a VA Appraisal?

If you receive a lower appraisal than expected, a Reconsideration of Value (ROV) is a way to appeal that decision and request a second look. The buyer or the seller may make a formal request in writing to the lender.

An ROV for a VA loan is a fairly straightforward process that could provide you with a better outcome. VA lenders require an appraisal to ensure the value of the home is at least as much as the amount borrowed to purchase it. This is because the value of the home provides security for the loan. If you default on the loan, the lender must be able to earn enough from its resale to pay back what you’ve borrowed. That’s why they place so much importance on the appraisal.

Reconsideration of Value

An ROV is a formal dispute made by a buyer or seller when there is a disagreement on the value of a property. To be clear, this process isn’t like asking for a second opinion from another appraiser. There’s no need for a new appraisal to be conducted. It’s not an opportunity to use a different appraiser to evaluate the home.

Rather, the ROV is a way to provide facts about the property to help show that the current appraisal value is incorrect. These are factors that could have been overlooked or otherwise missed during the initial appraisal process.

A number of factors could make this a worthy consideration, such as:

  • Evidence of errors: Is there inaccurate information on the report? Perhaps the appraiser used old sales reports. They could have the home’s square footage, number of bedrooms, or condition wrong. Showing that this information is inaccurate could potentially change the appraisal value.
  • Incorrect comps: It’s possible that the appraiser didn’t consider the right comps (or comparison properties). It’s possible to submit up to three comparable home sales that were not included to verify that old or inaccurate information was used.
  • Borrower letter: The buyer can also write a letter to request an ROV with reasons they think the appraisal value is not accurate and what it should be (be sure to include valid reasons such as the current condition, missed additions to the property, or proof of increase neighborhood home values.).

How a Reconsideration of Value Works

To start the ROV process, reach out to your VA lender. There are two prospective methods to use for an ROV. The method used is determined by how much you believe the valuation is inaccurate.

Less than 10% Valuation Change

If the amount you are seeking is less than a 10% change in the property valuation, the VA lender reviews the request. The lender then decides if it has merit. If so, it will send the request to the original VA appraiser along with all documentation submitted by the buyer or seller requesting the ROV.

The original appraiser then considers the new information. The original appraiser then decides if they agree that the value should be higher, and if so, by how much. After reviewing, the appraiser either approves the increase or decides to leave it as is. The appraiser is not obligated to make a change. The appraiser could decide to respond to the request with information explaining their decision, but that doesn’t always happen.

In this situation, if the appraiser doesn’t approve the change, neither the buyer nor the seller can submit that request again.

More than 10% Valuation Change

When the buyer or seller requests a value change that’s above 10%, the process is more complex. The mortgage lender typically will skip sending the information to the original appraiser. Instead, the lender submits the information provided, including all supporting documentation, directly to the Department of Veterans Affairs. There, the VA staff member will review the original appraisal information.

The staff member at the VA Regional Loan Center will then make a determination of the value of the property based on all available information. There’s no guarantee that the VA will revise the value of the loan in any way.

Additionally, if the VA does not revise as desired, there’s no way to file a second Reconsideration of Value as this decision is final.

In either of these situations, it’s critical to put your best foot forward. It is crucial that you gather as much data as possible to determine what facts could be helpful in swaying the reviewer to increase the value. It’s important to use facts and evidence that backs them up rather than pleading for approval.

Tidewater Initiative on VA Loans

An ROV is one option for challenging an appraisal, but the Tidewater Initiative is another route to take. This time, you can challenge that low valuation prior to the VA making the appraisal official.

If an appraiser completes the valuation process and believes that the property is likely to miss the specific valuation the lender is looking for, Tidewater may be invoked.

In this process, the VA lender has two days to provide the appraiser with additional information, including additional comparable home sales that support the desired valuation of the property. Here’s what typically occurs:

  1. Appraiser completes the appraisal and recognizes that the value is likely to be lower than the pending sale price.
  2. The appraiser must contact the designated point of contact about the value. They cannot discuss the content of the report, only explain they are asking for any additional information available.
  3. The point of contact, which is often the VA lender, then has two days to provide additional information for the appraiser to substantiate the property price. This could include additional comparable home values within your neighborhood.

The appraiser then uses the information to determine the proper appraised value. This doesn’t automatically increase the value of the property. The appraiser still has to determine if the new information, and all information available, helps to support the pending sale price of the property.

If that does not happen, the appraiser must provide more information, including who provided all requested information, what information was provided and why the information didn’t lead to the value the VA lender was expecting.

This process can add two days to the appraisal process. On the other hand, the process has reduced the number of ROVs requested by Veterans for low appraisal values.

At the end of the day, in some situations, the VA Tidewater Initiative and the ROV could fail. In situations where this occurs, it’s possible to go back to the seller and renegotiate the purchase price of the home. Or, it might be better to walk away from the deal and find another home.