Common Appraisal Issues for VA Home Loans
As you start looking for homes to buy, one of the most important factors to look for is the condition of the homes and whether they will meet VA’s minimum property requirements.
What are Minimum Property Requirements?
The VA’s minimum property requirements are intended to ensure that any home loans the VA guarantees are for properties that are livable — that the home is structurally sound and hazard-free — and that the value of the home is consistent with the loan amount.
Your lender will order an appraisal with a VA-approved appraiser to determine whether the home meets the VA’s property standards.
What issues can arise with a VA appraisal?
Some homes will need some work or maintenance to bring them up to VA lending standards. This is particularly true of older homes.
A real estate agent, particularly one with VA experience, can help point out any issues that might be flagged by an appraiser in advance.
Common VA Appraisal Issues
While below is not a comprehensive list of problems areas, they are a few of the easiest items for you to visibly see that may come up on the VA appraisal as deficient:
- Chipped and or peeling paint. Paint issues, in general, can be flagged by the appraisal. In particular, pre-1978 was lead-based paint, which will be flagged if chipped, but paint issues, in general, can be flagged by the appraisal).
- Handrails. Missing or uninstalled handrails could be flagged, particularly on anything over 3 steps tall.
- Ground Fault Circuit Interrupter (GFCI). These outlets prevent shorting and should be installed near any sinks or water supply, including kitchens and bathrooms.
- Roof and shingle issues. If the shingles are older or look to be in poor shape, the appraiser may require a contractor to submit a letter confirming the roof will be good for another 3+ years.
- Mold and mildew. Any visible moisture problem along with mold and mildew issues will almost always be flagged by an appraiser.
- Electrical. Appraisers don’t like to see exposed or bare wires. This also includes open junction boxes. If the electrical or boxes don’t look good, you can also assume that the appraiser will feel the same way. Also, check to be sure that the breaker panel is up to code.
- Deck and exterior staining. Some appraisers will require exposed wood to be either stained or painted.
- Appliances. All appliances must be attached to the home. While there may be some exceptions to this rule, consulting with the lender would make sense to ensure that the sale won’t fall through.
- Utilities. All utilities to the property must be in working order and turned on
- Heating, ventilation and cool (HVAV). In some areas, you may not be required to have both heating and air conditioning. However, if one is missing there is a good chance the appraiser will flag it. While AC is not always necessary, most areas require a source of heat at the very least.
- Windows. The windows should be in operating condition, without cracks. If any windows are cracked, or missing panes, they will be flagged by the appraiser.
This certainly doesn’t cover all items an appraiser will be looking at but these are a good place to begin as the buyer.
What if the appraisal comes back low?
Sometimes the appraisal will come back with a lower home value than the amount of loan. If this happens, you can pursue reconsideration of value (ROV) or work with the seller to negotiate a lower sales price.
You may also choose to pass on the home since a property that doesn’t meet the VA’s minimum property requirements might not be livable.
For more information, review our guide on low VA appraisals here.
The goal of VA appraisals
Keep in mind, an appraiser will be looking to be sure that the property is “safe, sound, and secure.” The goal of the VA loan program is for service members and veterans to be able to move in and enjoy the home — not to get stuck repairing it.
In many instances, the homes veterans end up owning are move-in ready. When writing an offer on a property that has some issues that need to be addressed, it is sometimes better to negotiate fixing and repairing these items prior to the appraisal. That way, the appraiser will only point out additional issues, and not the ones that you knew were going to be problems.
Remember, if the appraiser requests work orders for repairs, he or she will likely have to come back to ensure that those items were actually completed, likely requiring an additional fee.
Working with a real estate agent can help you clear the VA appraisal
Working with an agent who is well versed in VA home loans, and is willing to help you get through the problems, will be the most helpful to you. Most fixer-upper homes are probably not going to meet VA requirements. The VA has more requirements than say, an FHA or conventional loan, but their sole focus is that you are going to be able to fully enjoy the home.
VA appraisals help protect you too
Although the VA appraisal might seem like another step you need to take before you can get a loan, it’s an important part of the mortgage process. The VA relies on the appraiser to make sure that the home is liveable and a good long-term value for the veteran. So don’t let it dissuade you from taking advantage of one of the best mortgage products on the market.