The VA loan appraisal process can be mysterious to first time home buyers, but it's also sometimes confusing for first time sellers. A first-time buyer who meets up with a first-time seller could have plenty of unanswered questions about how it all works, including how the VA appraisal rules address the condition of older homes on the market.
Here’s a good example of the types of frequently asked questions in this area:
"What do we need to know about older homes in order to obtain VA financing? For example, does the VA consider foundations of rock and mortar? Are there any age requirements for furnaces, electrical panels, etc.?"
These are definitely important questions for anyone considering the purchase of an older home. Housing markets all over the United States have historic districts and regular neighborhoods with homes that weren't built in the last 20 years. How does the VA address the age and condition of older properties?
In some cases VA appraisal rules don't specifically address issues such as the specific type of foundation a home was built on. Instead the rules state the property must conform to local or state building codes. Thus, the overall condition of the property is an important part of the appraisal process.
For example, the Houston Regional Loan Center offers a list of VA Appraisal Guidelines which states, "A property in a badly deteriorated condition is not eligible for appraisal unless VA agrees there is a reasonable likelihood that it can be repaired to meet VA Minimum Property Requirements (MPRs) prior to closing. Appraisers should notify VA of this issue before completing the appraisal."
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When considering the mechanical systems in the home (electrical system included), VA MPR rules include the following:
"Mechanical systems must be safe to operate, be protected from destructive elements, have reasonable future utility, durability and economy, and have adequate capacity and quality."
"Reasonable future utility" is an important concept. If the current features of the home do not have such durability or might not be safe to use for extended periods, it could drastically affect the appraisal of the home.
Requirements for appliances, mechanical systems and other features may not be listed in detail in the VA rules, but local, state or federal ordinances may have much to say. It's best to consult with an expert in state/local code on a specific property or condition of said property. Applicable laws could play a big part in whether a particular home is suitable for a VA guaranteed mortgage loan.