A formal process to appeal VA appraisals
Among the benefits of buying a home with a VA mortgage is that a formal appraisal review process is built into mortgage underwriting.
The process is called a “Reconsideration of Value” and it’s clause may be invoked by either the buyer or the seller during a VA purchase money transaction.
You can use the Reconsideration of Value any time that the appraised value of a home is shown to be less than the home’s contracted price, which can help to hold a VA purchase transaction together.
By contrast, with an FHA or conforming mortgage, there’s no such process. A home which doesn’t appraise at purchase price will typically result in a canceled contract.Verify your VA loan eligibility (May 31st, 2020)
VA loans : 100% financing, no mortgage insurance
VA loans are a special class of mortgage, backed by the U.S. Department of Veterans Affairs (VA).
VA loans give borrowers lower-than-average mortgage rates and access to “easier approvals”. They’re available to members of the military and surviving spouses; and account for a substantial share of all home loans made.
VA loans are guaranteed by the government, which makes banks eager to offer them. The “guarantee” means that the government will repay a lender for losses which occur in the event of a borrower default.
VA loans were created as part of the G.I. bill in 1944. A minimum term of service usually is required.
Eligible VA borrowers can use the VA loan program to :
- Buy homes with zero downpayment while paying no annual mortgage insurance
- Refinance with no income, credit or asset verification; and no formal appraisal
- Get access to mortgage rates which are often lower than comparable conforming rates
However, one of the major VA loan benefits is that a formalized process by which to appeal an appraisal is included with the loan.
If you don’t like your initial appraisal, you can appeal it.
Appealing your VA home appraisal
When a VA appraisal fails to meet the home’s purchase price, the buyer or seller party may request a formal Reconsideration of Value.
This begins the appeal process.
The Reconsideration of Value process is not like asking for a second opinion; there is no new appraisal performed, nor is there an opportunity to use a “different appraiser”. Rather a Reconsideration of Value is about presenting facts that may have been overlooked or omitted by the original home appraisal.
With a request made in writing to the lender, parties to the purchase may challenge the appraisal and its findings.
Common challenges which appear in a Reconsideration of Value include :
- Additional comparable homes which were not used in the initial appraisal
- Data on why specific comparable homes should not have been in the appraisal
- Errors in square footage, room count or school district
- Errors in upgrades, age, or condition which may have an effect on value adjustments
Buyers or sellers may also submit a Comparative Market Analysis (CMA), if desired.
In general, the more relevant, supporting documentation the parties can provide to the original appraiser, the more likely that the Reconsideration of Value will have a positive outcome.
Want to submit for a Reconsideration of Value? Ask your lender to get started.Verify your VA loan eligibility (May 31st, 2020)
Reconsideration of value: How claims are handled
When a Reconsideration of Value is received by the lender, there are two potential courses of action, depending on the severity of the request.
For appraisal appeals in which the requesting party seeks less than 10% in valuation change, the mortgage lender will review the request, then forward it to the original VA appraiser, along with all submitted, supporting documentation.
The original appraiser will then consider the request and either increase the appraised value, or leave it as-is.
Note that the appraiser is under no obligation to raise the appraised value, and may respond to your request with a letter explaining why the original value is valid and correct.
If this happens, a second Reconsideration of Value may not be submitted.
However, if the requesting party seeks a valuation change of 10% or more, the mortgage lender will skip the original appraiser as part of the review process and will forward the Reconsideration of Value request direct to the Department of Veterans Affairs.
There, an agency staff member will review the original appraisal and the submitted, supporting documentation, and will issue a revised value.
Note that there is no guarantee that the revised value will be different from the appraiser’s original appraised value.
In this instance, again, a second Reconsideration of Value may not be submitted.
Note that a Reconsideration of Value may not be used to override an appraiser’s opinion of minimum property requirements — health and safety standards meant to ensure that veterans purchase “move-in ready” homes.
Get today’s VA mortgage rates live
Demand for military loans is at a 20-year best. The program is easy, accessible, and home buyer-friendly. Plus, mortgage rates are great.Verify your VA loan eligibility (May 31st, 2020)