How VA appraisals work

Congratulations! You are using your VA loan benefit to buy a home.

Once you are under contract on a home, the lender will tell you that the home needs to be appraised. People usually have many questions about appraisals. The following are some of the most common ones we receive along with their answers.

Are appraisals inspections?

No, an appraisal for a VA mortgage is not an inspection of the home. It is simply an assessment of its value so that the lender is assured it’s worth the amount of money you’ll be paying — and borrowing.

Are they required?

Yes, to use a VA loan, you must have a VA appraisal performed.

How is the value of the home determined?

The VA appraiser will consider the construction, condition, age of the home and the property values of neighboring homes. The appraiser will look at the recent sales prices of three homes in the area that are similar in size and age. For some locations, it can be difficult to find three comparables, so there are instances where they will only use one.

What if the VA appraisal comes back lower than the purchase price contracted?

There are some options if the VA appraisal comes back lower than the home’s purchase price.

• The buyer can pay the difference between the amount the appraiser has valued the home and purchase price.
• The buyer can negotiate with the seller to lower the purchase price.
• The buyer can request switching the loan to a conventional one and have another appraisal performed.

Will the VA redo an appraisal?

No, the VA will do only one appraisal, even if the value of the home is less than what the buyer believes is accurate.

What else does the appraisal do besides ensuring the purchase price is fair?

The appraiser assesses the home to make sure it meets VA and lender guidelines. The guidelines address whether the structure is safe and free from health hazards.

Some other guidelines include:

• Is the property a residence?
• The property should be big enough to have living space.
• The electrical and plumbing systems should be in working order.
• Heating system should be connected and working.
• Water supply should be connected, working and meet all local and federal standards for quality.
• The roof should be free from missing shingles and holes.
• There can’t be any problems, such as mold or leaks, in the basement or crawl spaces.
• The property needs to have access from the street by driveway or walkway.
• There can’t be termites, lead-based paint or poor construction.

Keep this in mind: A VA appraisal is for the buyer’s benefit as well as the lender’s. It protects the buyer (that’s YOU!) from overpaying for a home or purchasing one that may have serious issues that could end up costing thousands of dollars to repair. The information from the appraiser can be used to decide if you would like to continue with the purchase of the home or if you would be better off finding another home. Have more questions? Primary Residential Mortgage, Inc can help.