How to deal with the VA when the appraisal is low



    Since we celebrate Veteran’s Day Saturday, I thought now might be a good time to remind our veterans about their amazing benefits – especially the VA loan. While it’s one of the best programs on the market today, like any loan, there may be pitfalls on the way to closing.

    Just when you can almost feel the house keys in the palm of your hand and envision the moving van pulling up to the house, the appraiser comes along and claims the house isn’t worth what you have agreed to pay for it. Unfortunately, like with all mortgages, the appraiser’s opinion is all that matters.

    Reconsideration of Value

    In September 2012, during the housing crisis, one in three real estate transactions had problems because of the appraisal, according to a study by the National Association of Realtors. Although we’ve come a long way since then, homes may fail to appraise for the amount the buyer has offered even in the healthiest of real estate markets.

    Fortunately, you’re dealing with the Department of Veterans Affairs so you have a bit more leverage than you would if you were using a conventional loan. The VA offers borrowers a process known as the Reconsideration of Value, or ROV for short.

    Requesting a reconsideration of value is a team effort, so we’ll work right alongside you during the process.

    Everybody makes mistakes

    The first thing I consider when an appraisal comes in low is that the appraiser may have made a mistake. Hey, it happens. So, I’ll go over the report looking for errors and/or omissions.

    Some of the mistakes I’ve found in the past include:

    • Getting the square footage of the home wrong
    • Mistakes with the age of the home or those the appraiser used to compare to the home.
    • Not taking into consideration the locations of the homes – valuing a home on a busy street, for instance, the same as one in a key location within a subdivision.
    • Homeowner-performed upgrades not considered.
    • The age of the home or the age of the homes considered comparable.

    I’ve also learned that sometimes the errors show up in the information about comparable homes that the appraiser used in his or her valuation. This requires extensive research, but it’s worth it to me if it will get you the loan for that house.

    Where’s the evidence?

    We’ll need to gather as much evidence as we can to back up our claim for a Reconsideration of Value. For instance, if a neighborhood home sold for less than what it should have, we need to find out why. A sale to a family member is the typical reason, and whatever it is, it skewed the value for the neighborhood and shouldn’t be considered in the appraisal.

    Any evidence we can find to justify a higher sale price is well worth pursuing.

    Now we contact the lender

    It’s the lender that acts as the middle man or woman during the Reconsideration of Value process. We will work with her, supplying her with all the documents and evidence and then she will submit the ROV request to the original appraiser.

    The VA requires that the appraiser review all of our materials and then reconsider the appraised value of the home and to do so within five days.

    The results of the review are the last word and no further negotiations will be entertained.

    Even if the appraiser doesn’t adjust the home’s value, you have other options to save the deal, and I’m happy to discuss those should the time come.

    Learn more about the fabulous VA loan, here.

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