Common Appraisal Issues for VA Home Loans
by Peter Nett, real estate agent and Marine Corps Veteran
As you start looking at home 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.
Many homes regardless of age typically need some form of work or maintenance done to bring the home up to VA lending standards. A real-estate agent with experience in home sales especially VA transactions, can typically point out the majority of issues that might be “flagged” on an appraisal.
The appraisal is the tool that the VA-approved lender will use to determine whether the home meets VA’s property standards.
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 (pre 1978 was lead based paint, which will be flagged if chipped, but paint issues in general can be flagged by the appraisal)
Handrails – not installed or missing (consider installing anything over 3 steps)
GFCI (Ground Fault Circuit Interrupter) these are outlets that prevent shorting, these should be installed in near proximity to any sinks or water supply, including kitchens and bathrooms.
Roof and shingle issues – In my experiences, if the shingles are older or look to be in rough shape, the appraiser may require that a contractor submit a letter that the roof will be good another 3+ years, or even require that the roof be replaced.
Mold and Mildew – this item can be slightly tricky, but 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 doesn’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. Some cities and states require that the breaker panel is to code prior to sale. Your agent should be able to help you find the right contractor to complete the work.
Deck and exterior staining – I have come across a few appraisers who will require that exposed wood be either stained or painted.
Appliances –The property will be required to have all appliances attached to the home. 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. Several appraisals on my clients’ transactions have pictures showing the water running, and lights turned on. Remember if the utilities are turned off, it can take several days to have them up and running. Often, when a home is bank-owned, the bank will winterize the property which includes turning off the utilities. It takes some effort for the bank or current owner and agents to get the utilities on prior to the appraisal. If the utilites aren’t turned on, the appraiser has to return to the property later for another inspection which can cost you money!
HVAC (Heating Ventilation And Cooling) while in some areas you may not be required to have both heating and AC, if one is missing there is a good chance that the appraiser will make note of it. If AC is not required, for instance, then you should be fine. If it is, be prepared to negotiate this item. 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.
As I said previously, this certainly doesn’t cover all items an appraiser will be looking at, but they are a great place to begin as the buyer.
The appraiser sometimes can be a point of contention for the buyer, and even the real estate agent. But it helps to keep in mind that the appraiser is giving the lender (and the buyer) assurance that the property meets minimum standards required by the VA.
Something to 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 is for the Veteran to be able to move in and enjoy the home; not fix and repair it.
In many instances, I find that 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, I find that 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.
Also 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.
In short, 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 help to you. I find that most fixer-upper and TLC 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.
That’s why the VA relies so heavily on the appraiser to make sure that the home is live able and a good long-term value for the Veteran.
Peter has been selling real estate for 9 years and works for Homes Plus Realty in Minnesota. Peter’s military history: Disabled Veteran, United States Marine Corps, honorably discharged as an E-5, with 4 years’ service. To contact Peter, you can visit his website, and also on his Facebook page.