Would-be homebuyers figure out pretty quickly that there are strict requirements for borrowers using the home loan program of the U.S. Department of Veterans Affairs (VA). A closer look reveals that the properties also have to meet certain standards, so anyone planning to use a VA loan to purchase their next home might want to take a few minutes to read over the VA appraisal requirements before they start home shopping.
Safe, Sound, and Sanitary: VA Appraisal Requirements
The VA appraisal serves two purposes, and both ultimately protect the borrower’s interests. The first is to provide an impartial valuation of the property. The second is to ensure that the property offers safe, sound, and sanitary housing.
A Question of Value
Part of a VA appraiser’s task is assigning a fair market value to the property. Before agreeing to back a loan, the VA wants to be sure that the property is truly worth its price tag. The VA appraiser uses a form called the Uniform Residential Appraisal Report, which is the same form used for conventional loan appraisals completed for Fannie Mae or Freddie Mac. The appraiser carefully examines the home’s interior and exterior, noting important aspects of its construction and relevant factors about the surrounding area. Then, they’ll use information from recent sales to assess the property, making adjustments as needed for differences between the home being appraised and those being used as comparisons before assigning a value. If the assigned value is equal to or greater than the sale price, then there’s no problem. However, lenders won’t loan more than the appraised value, so homebuyers face a decision if the appraisal comes in lower than the sale price.
What can you do if the appraisal comes in too low? As MilitaryBenefits.Info notes, homebuyers in this situation have a few options:
- They can dispute the appraisal by having their realtor provide recent sales data that supports the claim that the property’s value should be higher.
- They can take the appraisal to the seller and try to negotiate a lower price.
- They can accept the loan for the lower amount and opt to pay the difference out of pocket at closing.
- They can walk away from the sale.
The Minimum Property Requirements
The second half of a VA appraiser’s mission involves ensuring that the property is safe, structurally sound, and sanitary. This doesn’t involve completing a housing inspection, and a VA appraisal shouldn’t be considered a substitute for a housing inspection. Instead, it means confirming that the property meets the VA’s Minimum Property Requirements (MPRs). While the MPRs are rather detailed, NerdWallet offers a brief list of highlights that helps provide a basic idea:
- The property must be accessible. A public or private street with an all-weather surface should provide safe access.
- The home must have electricity for lighting. No visibly damaged or exposed electrical wires are allowed.
- There must be sufficient space for living, cooking, dining, and sleeping. Adequate bathrooms are also a necessity.
- Mechanical system must be safe to operate. They must also be adequately protected from the weather.
- The water supply must offer a continuous source of safe, hot, sanitary water.
- Safe sewage disposal must be the norm.
- The roof must be in good condition.
- Any crawl space must be properly vented and accessible.
- The basement must be dry and free of obvious structural issues.
- Water must drain away from the home.
- Exterior paint should provide coverage from the elements.
- The home must be free of defective conditions that threaten its safety or sanitation. If any are found, they must be corrected.
VA Appraisal Costs
According to ValuePenguin, both the cost and the time that you’ll spend waiting for a VA appraisal to be completed vary depending on your location. The fee for an appraisal typically runs between $425 and $900. As for timing, most states give appraisers up to 10 business days to complete an appraisal, but some states allow up to 28 days.