Buying a home with a VA loan is an exciting venture, but what happens when the VA appraisal comes in lower than expected? In this comprehensive guide, we’ll walk you through the steps to take, from understanding the VA appraisal process to dealing with a low valuation.
The VA Appraisal Process: A Quick Overview
The VA appraisal process is a crucial step in ensuring that the property you intend to purchase aligns with the value you’ve offered. Unlike a home inspection, the appraisal focuses on assessing the property’s value and overall condition, adhering to both VA and lender guidelines.
Here’s a breakdown of the key elements:
Property Value Assessment: The VA appraiser conducts a meticulous evaluation to determine if the property’s value corresponds to the offered amount. This assessment is essential for securing the loan and ensuring a fair transaction.
Adherence to Guidelines: The appraisal process is not only about the property’s value but also about confirming that it meets specific VA and lender guidelines. This includes structural integrity and the absence of health hazards, ensuring the property is a sound investment.
Not a Home Inspection: It’s vital to note that a VA appraisal is distinct from a home inspection. While an inspection dives into the physical condition of the property, the appraisal is primarily concerned with its financial aspects.
How Often Do VA Appraisals Come in Low?
One common concern for homebuyers is the possibility of a VA appraisal coming in lower than expected. While the majority of VA appraisals align with anticipated values, statistics suggest that approximately 8% may come in lower.
Factors contributing to a lower appraisal can vary, including market fluctuations, discrepancies in property information, or differences in the appraiser’s assessment. Being aware of this possibility allows buyers to be prepared and proactive in addressing potential challenges.
Can a VA Appraisal be Appealed?
Encountering a low VA appraisal doesn’t necessarily mean a dead end. The VA offers a recourse known as the Reconsideration of Value (ROV), providing a formal process for appealing a low appraisal. Here’s a step-by-step guide:
Initiating the ROV: The first step is to apply to the VA for a reconsideration of value. This involves submitting a formal request for a reevaluation of the home’s value.
Documenting Comparable Home Sales: Buyers can submit up to three comparable home sales that were not considered in the original appraisal. This involves providing data from the Multiple Listing Service (MLS) and a written summary of why these comparables are more relevant.
Identifying Errors: If there are errors in the appraisal report, such as inaccurate information or non-comparable homes being used, these should be documented. A detailed summary of identified issues can strengthen the appeal.
Borrower’s Letter: Drafting a comprehensive letter explaining why the appraisal value should be higher, along with the desired value, is a crucial component of the appeal.
After completing these steps, the ROV request, in collaboration with your loan officer, is submitted to the VA regional loan center for review.
Understanding Reconsideration of Value (ROV)
In the intricate world of real estate transactions, the Reconsideration of Value (ROV) becomes a beacon of hope for homebuyers faced with a VA appraisal that falls short of expectations. Let’s embark on a journey of comprehension, unraveling the layers of the ROV process.
The ROV is a formal mechanism provided by the VA, allowing buyers to appeal a low appraisal. Here’s a detailed exploration of its components:
Initiating the ROV:
The process commences with a formal application to the VA for a reconsideration of value.
This application serves as a plea for a reassessment of the property’s value, providing an avenue for correcting potential discrepancies.
Documenting Comparable Home Sales:
One pivotal aspect of the ROV is the submission of up to three comparable home sales that were overlooked in the initial appraisal.
Data from the Multiple Listing Service (MLS) supports this submission, emphasizing the relevance of these comparables to the property in question.
Identifying Errors:
If errors are identified in the original appraisal report, they become valuable ammunition in the ROV process.
This involves a meticulous inspection by your real estate agent, summarizing any inaccuracies or misjudgments in the appraisal report.
Borrower’s Letter:
Crafting a compelling letter is the linchpin of the ROV. This written appeal should articulate in detail why the appraisal value should be higher.
Including the desired value in this letter strengthens the case, providing a clear perspective on what the homeowner believes the property is worth.
Upon the completion of these steps, the ROV request, orchestrated in collaboration with your seasoned loan officer, is dispatched to the VA regional loan center for comprehensive review. This formal process ensures that all relevant information is considered, offering a fair chance for a recalibration of the property’s value.
What If the ROV Does Not Work?
In the realm of real estate negotiations, setbacks can occur even after a diligent appeal process. So, what avenues are available if the ROV falls short of the desired outcome?
Ask for a Lower Sales Price:
One pragmatic solution is engaging with the seller to negotiate a lower sale price. A candid conversation, backed by the appraisal report, often encourages a mutual understanding.
Cover the Difference in Cash:
For those with robust savings, covering the variance between the appraised value and the approved loan amount with personal funds is a feasible option.
Split the Difference Between Buyer and Seller:
Negotiating a shared responsibility for the difference in value can be a diplomatic approach. Both parties contribute to bridge the gap, fostering a fair resolution.
Negotiate Add-Ons:
Sometimes, sellers may be open to excluding appliances or furniture from the sale, indirectly reducing the property’s overall value. Negotiating these add-ons can be a strategic move.
Find a Different House:
As a last resort, restarting the home search becomes a viable option. Armed with a better understanding of the appraisal process, buyers can embark on a new quest for their dream home.
Frequently Asked Questions:
Q: What happens if the VA appraisal is lower than my offer?
A: If the VA appraisal comes in lower than your offer, it can present challenges. The lender typically uses the appraised value to determine the maximum loan amount. In such cases, you may need to reconsider your options, negotiate with the seller for a lower price, cover the difference in cash, or explore the possibility of a Reconsideration of Value (ROV) with the VA.
Q: How do I challenge a low VA appraisal?
A: Challenging a low VA appraisal involves initiating a Reconsideration of Value (ROV). This formal process allows you to appeal the appraisal by providing additional information, such as overlooked comparable home sales, evidence of errors in the appraisal report, and a detailed letter explaining why you believe the appraisal value should be higher. Working closely with your loan officer and real estate agent is crucial throughout this process.
Q: What should I do if my appraisal comes in too low?
A: If faced with a low VA appraisal, consider negotiating with the seller for a more aligned sale price. Alternatively, explore covering the difference in cash, suggesting a shared responsibility with the seller, or negotiating add-ons. If these options prove challenging, restarting the home search with a better understanding of your budget may be a viable solution.
Q: What happens if the VA appraisal is late?
A: If the VA appraisal is delayed, it can impact the overall timeline of the home buying process. Late appraisals may result in delayed closing dates. Communicate closely with your real estate agent, lender, and the VA appraiser to understand the reasons for the delay and to manage expectations. Timely communication is key to addressing any potential issues caused by a late VA appraisal.
Conclusion:
In the intricate dance of VA appraisals, ROVs, and negotiation strategies, the journey to homeownership becomes a testament to resilience and knowledge. At Enterprise America, we recognize that each step in this process is a significant investment, not just in property, but in your future.
As you face the complexities of the real estate landscape, remember that our team stands by you, leveraging our expertise to turn challenges into opportunities. The ROV process, while formal and sometimes daunting, is a tool at your disposal to ensure a fair evaluation of your prospective home’s value.
In the eventuality that the ROV doesn’t yield the desired outcome, our commitment to your homeownership journey remains unwavering. Whether it’s negotiating with sellers, exploring financial options, or embarking on a fresh search, Enterprise America is your partner in charting the course forward.
Embrace the possibilities, trust in your ability to navigate the complexities, and let Enterprise America be the compass guiding you toward the home you deserve.
