It used to be that when dealing with VA loans, the loan killer was a low value. Now value is not as much a problem as property condition. There are no problems with my buyers as they have excellent credit and job history. However, the house they wish to purchase is in need of many cosmetic repairs and they have a limited amount of funds without their current home selling first. At only $100,000, this is not a bad deal. Per the appraiser, the house now meets the VA minimum standards in it's FAIR condition (this after some minor repairs). But no mortgage company will give them a VA loan without it being in AVERAGE condition. It needs to be noted that FAIR vs AVERAGE is basically an opinion and it changes depending on the neighborhood. This house would not be considered AVERAGE in a more prestigious neighborhood but it is AVERAGE for it's neighborhood. Common sense would dictate that if there is a MINIMUM Standard for a VA Appraisal that it should somehow also meet the MINIMUM Standards for a VA Loan. But as we all know, common sense does not always rule.
I'm OK with VA loans, but I've had my problems...My pet peeve is an appraiser from out of the area when you're trying to put together a deal...BUT, don't turn away from the business, work with what you have.
I haven't had any issues with VA loans, even with foreclosure properties. Perhaps the appraisers in each area look at them a bit differently. I will count my clients in the lucky category.
It seems to me that the primary concern here for the appraiser is to give his opinion of value for the lender to make a risk determination. Condition of the property in a "fair", "average", or otherwise is very subjective. The average in one neighborhood is certainly different from the average in another. I believe the appraiser should be required to describe in detail what makes a house fall into any category that is less than "average" giving the home seller the details necessary to make it right. Just my thoughts, of coarse.
Are VA appraisal requirements simlar to FHA requirements? I have some buyers who are preapproved for 100% financing with a VA loan. At their price point, we are only seeing REO's and short sales and they all need some degree of work. I'm not sure we can get a bank (in either case) to agree to 100% financing, but if we do I fear the appraisal will kill the deal. Just how pickly are VA appraisals?
Hi Jenny,
FHA can be just as picky as VA. It is not suppose to be cosmetic, but I have seen some very gray areas where the Appraiser has written up what I consider cosmetic. One solution (providing the Seller is agreeable) is to have these "repairs" done with the buyer paying for them at closing. If it doesn't close the seller is responsible (and the paperwork needs to support this). It could be a good deal for the seller in that it makes the property more attractive to other buyers if it is placed back Active. Although, I don't recommend the following, it is also an option. Basically the Buyers pay for the repairs but they are taking a real risk of losing their money if it doesn't close... And it needs to be mentioned that there is one very major difference between FHA and VA... With VA, the seller is stuck with the appraisal for one year. So, basically, a second appraisal is out of the question. With FHA, if the appraiser is being extremely unreasonable, you could always try a second appraiser to see if his/her opinion is different. In my most recent situation, both the Seller and Buyer worked together on getting the needed repairs done. It took an extra month to pull it all together, but we finally have a "Clear to Close!" And there is one other option... if the buyer doesn't have the money for the down payment but does have the amount for the closing costs, the offer could be increased to include the seller paying the buyer's closing costs and prepaids thereby allowing the buyer to change to an FHA loan and pay the down payment. Just a thought...
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