The VA appraisal establishes the fair market value of a home being purchased or refinanced with a VA loan. VA appraisals are a key part of VA loan approval and are required by the Department of Veterans Affairs for VA purchase and cash-out refinance loans.
The VA appraisal process isn't intended to unreasonably raise the bar when it comes to quality in a new or existing house; instead it's designed to protect the borrower, ensuring the home is safe, sanitary and fairly priced.
The borrower generally pays for the VA appraisal, but may try to recoup appraisal fees through negotiating with the seller.
VA appraisal expenses may also include any required follow-up appraisals known as “compliance inspections” that may be required as a condition of loan approval. These inspections usually happen because the initial appraisal included repairs or modifications to the property to bring it into compliance with VA minimum property requirements.
You can learn more about VA appraisal fees here.
VA Minimum Property Requirements (MPRs) have some basic guidelines and some more specific rules where certain areas such as lead paint, the location of a home within a high voltage transmission easement, or water connection issues are concerned.
Appraisers follow these guidelines and will report any required repairs based off the requirements. Fortunately these repairs do not disqualify a property for VA loan approval and often force borrowers to truly consider a home’s value.
Learn more about VA appraisal guidelines and the VA’s minimum property requirements here.
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Generally, your lender will order the VA appraisal once you have a contract on a home. However, any party to the transaction may also request a VA appraisal.
Once granted, a VA-licensed appraiser will inspect the property inside and out. VA appraisers are assigned by the VA and are a neutral third-party to the transaction.
Appraisers are required to review the property and suggest an appraised value, even if it doesn't conform to the sale price of the home. The VA has a strict "no accommodation" clause that forbids non-standard practices that "accommodate" the sale price of the property.
VA-assigned appraisers must include a location map in the report, building perimeter sketches and photographs of either the sale property or the lot where proposed construction is to take place.
For concerned house hunters, one of the most important parts of the appraisal report is an itemized list of issues the Department of Veterans Affairs describes as "any observed repairs required to be completed." The report includes any corrections to the property to make it conform to VA regulations. Items on this list must be fixed before you close on your home.
Buyers can ask sellers to pay for needed repairs or possibly bear the cost themselves. Talk with your lender for more information.
Keep in mind that the VA appraisal process is not intended as a complete, top-to-bottom home inspection. Just because a property passed a VA appraisal does not guarantee that the home is free from defects.
For a more complete look at a home’s condition, the buyer is strongly encouraged to pay for an optional home inspection. This inspection is not required as a condition of VA loan approval, but no borrower should commit to the purchase of a home without paying to have it inspected. You can learn more about the differences between a home inspection and VA appraisal here.