Dec. 30, 2019
Veteran Affairs Home Loan Appraisal
Having an appraisal come in below the contract price sometimes happens and can be challenging. One part of the appraisal reviews the safety and health standards of the property. This term is refereed to as the Minimum Property Requirements. The other part is the VA Appraiser determining the home's value.
Let's say for example the agreed contract price for the home is $300,000 but the home only apprises for $250,000. One option is to renegotiate a change in the sales price to $250,000. The other option is to terminate the contract and walk away from the deal.
Another option the VA Buyer has is to appeal the VA appraisal. Before finalizing the appraisal the VA Appraiser can notify the lender that the home's value is below the contract price. This is known as invoking the Tidewater Initiative.
The Appraiser is not allowed to discuss the details of the appraisal report for the exception of the comparable home's being used to support the sales price. At this point the lender has two days to provide to the VA Appraiser additional home's to use as comparable home to support the purchase price.
The VA Appraiser will look at the comparable properties and issue a final appraisal report.
The appraiser will take those additional comps and issue the final appraisal report. If the Tidewater process doesn’t lead to a sufficient increase in value, the appraiser is required to provide a written explanation as to why.
Reconsideration of Value
The Department of Veteran Affairs (DAV) understands that mistakes can happen in an appraisal. Perhaps a value-adding features was overlooked or usable comparative properties were not used. On occasion the square footage of the home may have been miscalculated.
For this reason the DAV has an appeal process known as a Reconsideration of Value. There is no guarantee the results will be favorable. But it does give the Buyer another chance at a higher appraisal.
What if the Reconsideration of Value Fails
No two real estate transactions are the same and sometimes appraisal values can be difficult to predict. A few options the VA Home Buyer has if the Reconsideration of Value Fails.
- Ask the seller to renegotiate the sales price to reflect the home appraised value.
- The Buyer can make up the difference in cash.
- Walk away from the deal