Navigating the complexities of VA appraisals can seem daunting for both buyers and sellers in the real estate market. Whether you're a veteran looking to utilize your VA loan benefits, or a real estate professional aiming to assist your clients effectively, understanding the nuances of VA appraisals is crucial. This blog post will break down the key aspects of the VA appraisal process, debunk common myths, and illuminate the unique benefits of VA appraisals.

The VA Appraisal Process Explained

Who Orders the Appraisal?

Contrary to some misconceptions, the buyer does not order the appraisal when using a VA loan. Instead, the lender is responsible for ordering the appraisal directly through the VA portal. It’s important to note that the VA sets the appraisal fee and assigns an independent VA appraiser. This system ensures that the appraiser is impartial and certified, debunking the myth that local lenders might have better appraisers.

Appraisal vs. Inspection

It's essential to distinguish a VA appraisal from a home inspection. An appraisal is not an inspection. The appraiser’s job is to assess the market value of the home based on recent sales data of similar properties and to report any visible health and safety issues. However, they do not conduct a thorough investigation of mechanical systems or structural integrity like a home inspector would. This misunderstanding often leads to confusion about the appraiser's role and the scope of the appraisal report.

Debunking Myths Around VA Appraisals

Myth: VA Appraisals Undervalue Properties

One common misconception is that VA appraisals habitually come in lower than the selling price or market rate. However, VA appraisals are purely data-driven. They are based on comparable recent sales in the area, and an appraisal might only come in lower than the asking price if the property was incorrectly priced or if there is a factor that was not evident to the appraiser. There are actually two opportunities to challenge a low VA appraisal which is not something you get with any other type of loan.

The Tidewater Process

The VA offers a unique process known as “tidewater”, which kicks in if the VA appraiser believes the appraisal will come in low. This process allows the real estate agents to provide additional comparable sales data to justify the higher price. Tidewater is an opportunity to support the value of the property and often we see the appraisal come in at value once the agents have provided additional information to the appraiser. This proactive measure showcases the VA’s commitment to ensuring fair valuations, contrary to the myth that VA appraisals are arbitrarily low. If for any reason after the tidewater the appraised value is below purchase price and the real estate agents believe there is an issue we can appeal directly to VA which we do and have done. VA then reviews the appraisal impartially to see what the true value should be. I have seen appraisals increase after this however sometimes an appraisal is just low because there were never any comparable sales to support the value.

The Value of VA Appraisals

Protecting the Buyer's Interest

Another vital aspect of the VA appraisal is its role in protecting the buyer. VA appraisals ensure that veterans do not overpay for their homes. If an appraisal comes in low, the buyer cannot be forced to pay more than the appraised value unless they agree to cover the difference out of pocket. This rule is safeguarded by a mandatory VA waiver, known as the VA escape clause

Appraisal Transfers

A lesser-known benefit of VA loans is the ability to transfer appraisals between lenders. If a buyer decides to switch lenders, the VA appraisal can be transferred to the new lender without the need to pay for a new appraisal. This ability can save time and money, further demonstrating the flexibility and buyer-focused advantages of the VA loan program.

Final Thoughts

VA loans offer numerous benefits, and their appraisal process is designed with the veteran's best interest in mind. Understanding how VA appraisals work can help veterans and their agents navigate the home buying process more effectively and can debunk common myths that may deter some from taking full advantage of VA loans. Whether you are a veteran, real estate agent, or just interested in the housing market, appreciating the nuances of VA appraisals ensures you are better equipped to take advantage of this valuable benefit. Have questions? Give me a call 707-478-0637
-Jen