Have you heard that the VA loan appraisal is a complete nightmare? Luckily, what you heard isn’t true. It’s not as bad as they say. Yes, the VA has Minimum Property Requirements, but they aren’t so far out of the norm that it would be impossible to find a home to meet those requirements.
What happens if the home you want to buy doesn’t meet the MPRs? You will have some work ahead of you. The VA and the lender will require that the issues be fixed before the lender will close on the loan. That’s not the only issue though – what if the appraisal comes in lower than your purchase price? What are you supposed to do?
Keep reading to learn the top tips to get around these situations.
Dealing with a Home That Doesn’t Meet the MPRs
Your first step should be to ask the seller to do the repairs if the home doesn’t meet the VA’s Minimum Property Requirements. Yes, some sellers will balk at the idea and tell you no way. Others may be willing to fix the issues, though. Sellers recognize the fact that the VA won’t let you close on the loan if they don’t fix the issues. If your offer on the home is high enough, the seller may be willing to concede a little bit and do his due diligence in fixing whatever is wrong with the home.
If the seller refuses to do the repairs, then you will have to move onto another home. You are better off buying a home that passes the VA appraisal than dealing with a seller that won’t fix issues that occurred while the home was under his watch.
Dealing With a Low Appraisal
Another common occurrence is that the appraiser comes back with a value that is lower than what you offered to pay for the home. Again, the VA won’t allow this. The price must be lowered to the value of the home or you may not be able to buy the home. You have a few options in this situation:
- Ask the seller to lower the price. In a perfect world, the seller will see that he asked too much for the home and will agree to the price that equals the true market value of the home. If the seller does agree, you can move on with the purchase.
- Ask the appraiser to reconsider the value. If you have reason to believe that the appraiser is mistaken on the value of the home, you can ask for a Reconsideration of Value. Basically, this is another review of the appraisal. You must be able to provide the appraiser with documentation that led you to believe that the home is worth more than what the appraiser states, though. This usually means you have to find comparable sales that occurred within the last six months.
- Make a down payment. Your final option is to make a down payment on the difference between the sales price and the home’s value. This wouldn’t be our first recommendation since it will put you upside down on the home right from the start. You’ll constantly be chasing your tail to try to catch up and have some equity in the home. If the difference is minimal though and the house means a lot to you, it may be worth it.
The VA appraisal really isn’t much different from the appraisal on any other loan. In fact, the Minimum Property Requirements are in place to protect you. The VA wants to make sure the home is safe, sanitary, and sound before you move into it. The fact that the VA won’t allow a loan for more than the home’s value is also standard for any other loan program. It protects you from getting in over your head.