The appraisal is an important part of the VA loan process. It’s also where a lot can go wrong.
For one, a property might not meet the VA’s minimum property standards. If this is the case, the home will need to be repaired, or you may need to find another property to purchase.
Its appraised value also may come in under what you’ve offered for the home. This is what’s called a low appraisal, and it poses a problem for VA borrowers. You’ll either make up the difference between the two numbers out of pocket, renegotiate with the seller, or back out of the deal entirely.
If all of these sound less than ideal, there’s one more option: Ask the VA for a Reconsideration of Value.
What’s a Reconsideration of Value?
A Reconsideration of Value is essentially just a formal appeal of your property’s appraisal. You’ll file this with your lender and need to support evidence to support it, too.
This evidence might include:
- Comparable sales that weren’t in the original appraisal report. If you (or your real estate agent) can find recent sales in your neighborhood that support your offer price, this may be enough for an appraiser to adjust their valuation. Make sure the sales are of similar properties (same size, features, condition, age, etc.)
- Proof of any errors. You can also show that the appraiser made some sort of error on the report. Maybe they used old data, had details about your property wrong, or made some other mistake. Ask your agent to go through the report with a fine-toothed comb to spot any potential issues.
- A detailed letter. You can also just write a letter detailing why you think the home was undervalued. Are there upgrades or features that make it more valuable? Is its condition particularly stellar? Are there finishes or recent upgrades that are very high-end?
You can submit all this to your lender for review. If they believe it has merit, they’ll send it on to the appraiser or your local VA loan center. From there, it’s a waiting game until the appraiser has weighed in on your request.
If the home’s appraised value is adjusted based on your request, you may be able to proceed with your purchase as planned. If the value remains the same, you’ll need to go back to those initial three options.
You can opt to pay the difference between the appraised value and your offer price out of pocket, try to renegotiate the sale price with the seller, or back out of the transaction altogether.
If you opt for the latter, make sure you’re using a good real estate agent as you continue the home hunt. You want to be sure you’re putting in offers that can be supported by local comps and market data. If you’re making too-large offers, you may find yourself with a low appraisal once again.
Need more guidance? Reach out to a Premier Nationwide Lending office in your area today.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.