VA Appraisal, Notice of Value and Minimum Property Requirements

Why the VA appraisal is different

On many loans the lender orders an appraisal from a company it chooses. On a VA loan, the lender requests the appraisal through VA's system and VA assigns the appraiser from a rotating list of approved local appraisers. This keeps the appraiser independent.

The VA appraiser has two jobs. First, estimate the home's market value. Second, check that the home meets VA's Minimum Property Requirements (MPRs).

Notice of Value (NOV)

After the appraisal is reviewed, the lender or VA issues a Notice of Value. It lists the home's reasonable value and any repairs that must be made. Your loan is based on the lower of the purchase price or this value. The NOV value also sets the 4% cap on seller concessions.

If the value comes in below your price, you have choices. You can ask the seller to lower the price, pay the difference in cash, ask for a reconsideration of value, or cancel the deal. Every VA purchase contract must include the VA escape clause (sometimes called the amendment to contract), which lets you walk away without losing your earnest money if the value is low.

Minimum Property Requirements

MPRs are not about how pretty the home is. They make sure the home is safe, sound and sanitary. The appraiser looks for things like:

• Roof in good shape with reasonable life left
• Safe heating that can keep living areas at a healthy temperature
• Safe water supply and working sewage or septic
• Working electrical with no exposed or dangerous wiring
• Sound structure, with no major cracks, rot or active leaks
• Safe access to the property from a public or private road with an easement
• No hazards like peeling paint in older homes (built before 1978), active termites in areas where VA requires inspection, or broken stairs without rails
• Proper drainage away from the foundation
• Crawl space and attic access that let the appraiser see key systems

If the appraiser finds a problem, the NOV will list it as a required repair. The repair must be done, and often re-inspected, before closing. Who pays for repairs is a matter between you and the seller, but many sellers agree to handle them.

It is not a home inspection

The VA appraisal checks basic safety and value. It does not test every outlet, run every faucet or crawl through every corner. VA strongly encourages buyers to hire their own home inspector. It is often a few hundred dollars and can save you thousands.

Step by step: the VA appraisal process

1. Sign your contract with the VA escape clause.
2. Your lender orders the appraisal through VA's portal. You usually pay the fee, which varies by state.
3. VA assigns an appraiser who schedules a visit with the listing agent.
4. The appraiser inspects the home and pulls sales of similar homes.
5. Tidewater check: if the value looks like it will come in low, the appraiser gives the lender or agent two business days to send more sales data.
6. The report is reviewed and the Notice of Value is issued.
7. Repairs are made if required, then a compliance inspection may follow.
8. You move on to final underwriting and closing.

If you disagree with the value

Your lender can request a reconsideration of value if it can show better comparable sales or errors in the report. Send strong, recent sales of similar homes nearby. VA will review and may change the value, or it may not.

How long is an NOV good for?

A Notice of Value has an expiration date printed on it. If your deal falls through, the NOV can sometimes be used by another VA buyer on the same home before it expires. Ask your lender if the home you want already has a valid NOV.

Bottom line

The VA appraisal protects you from paying too much for a home with serious safety problems. Plan for it, include a home inspection, and build a little time into your contract for repairs.