Why You Need an Appraisal
The VA loan appraisal is an essential part of the VA loan approval. It determines the fair market value of a home that is going to be purchased or refinanced by means of a VA home loan. The Department of Veterans Affairs requires the appraisal for any VA home purchases. This is to protect potential buyers, in order to prevent them from buying a home that is fraudulently overvalued or possibly unsafe or unlivable.
When Does the VA Appraisal Expire?
Once the VA loan appraisal has been finalized, it may feel as though the clock is ticking. This is because in a way, it is. The buyer has six months to complete the sale, and if the VA home loan closes, the VA appraisal automatically expires. According to VA guidelines, a borrower is not allowed to reuse or resubmit an appraisal during the loan process once the original loan has closed. For example, a home purchaser cannot use the same appraisal they used for an initial loan to refinance that same home, even if it is within the initial six month time period after appraisal. Another VA appraisal must be completed for any loan requiring VA approval.
What to Do If the Appraisal Expires
If a borrower is unable to close on the VA home loan before the six month time frame after appraisal expires, the lender will arrange for a new appraisal. It is possible for the second appraisal to assign a lower value to the property in question, in which case, the initial appraisal will be rejected by the VA. Appraisal values can vary based on their timing due to the fact that fair market value is based on the housing market values of the time. Unfortunately, the housing market has been known at times to be volatile. If the market has changed significantly, this can lead to a lower appraisal of the property value. Property values are based on sales of comparable homes in the area.
How to Challenge an Appraisal That Is Too Low
In the rare case where a new appraisal is lower than the initial one, it is possible for a buyer to challenge the lower appraisal. This process is called a Reconsideration of Value, also known as ROV. Technically, anyone involved with the sale, including the buyer, seller or agent, can challenge the value assigned by the appraisal. Although not terribly complicated, purchasers should be aware that significant documentation is required to submit the paperwork for an ROV.
The VA loan appraisal should be examined for any potential inaccuracies, like errors in calculating the square footage or omission of structures or features on the property. Suitable documentation to support the claim includes floor plans, a competitive market analysis, and at least three comparable home sales from the surrounding area that were not used in the original VA appraisal. These documents are then submitted to the lender who will initiate the Reconsideration of Value if it is warranted.
Although it can be a stressful time, most borrowers have no trouble completing their home purchases well before the initial VA appraisal expires. Very few encounter problems with the appraisal process. However, it is best to be informed about any potential problems that could arise during the purchase.