VA Loan Q&A: The Appraisal

For some first time home buyers and newcomers to the VA mortgage process, the VA appraisal is something of a mystery. One of the most important things house hunters often need clarification on is the difference between a VA appraisal and an independently hired home inspection. Home inspections are for the buyer’s satisfaction, VA appraisals are meant to help the VA determine the fair market value of the home.

1. Why Does The VA Need To Conduct An Appraisal?

There are many reasons why the VA requires an appraisal. One is to insure that all properties bought with VA guaranteed loans meet minimum health and safety guidelines. Another is to establish the reasonable value of the property; the Department of Veterans Affairs won’t guarantee a home loan for more than this amount plus approved closing costs and other expenses depending on the type of loan.

2. How Does The VA Establish “Reasonable Value”?

According to the VA Lender’s Handbook, the reasonable value of any given property is “that figure which represents the amount a reputable and qualified appraiser, unaffected by personal interest, bias, or prejudice, would recommend to a prospective purchaser as a proper price or cost in the light of prevailing conditions.”

3. What If The VA Appraised Value Is Different Than The Asking Price?

Because VA rules state the VA loan can’t be more than reasonable value of the home (again, plus approved extras like energy efficient modifications and closing costs depending on the type of VA home loan) the buyer and seller must either renegotiate the asking price or the buyer must pay the extra cost out of pocket.

4. Who Can Request a VA Appraisal?

Anyone involved in the home purchase transaction can request a VA appraisal–but the appraiser MUST be VA-approved. That said, the VA rules clearly state that the Department of Veterans Affairs prefers the lender handle this portion of the VA home loan transaction.