VA Loan Appraisals: What You Need to Know

Once you’ve filled out your VA lender’s full mortgage application, found a home and put in an offer, your lender will order an appraisal. The appraisal is a critical step in the VA loan process, ensuring that Veterans and active military members receive a home that is a safe, sanitary and sound investment.

What is a VA appraisal?

A VA loan appraisal is a professional evaluation process that is required by the Department of Veterans Affairs (VA) for homes financed with a VA loan. This process is completed by a licensed appraiser to ensure the property meets the VA's minimum property requirements (MPRs) for safety, sanitation and structural integrity and to determine the fair market value of the home.

VA Appraisal vs. Home Inspection

A VA home inspection is not the same as an appraisal. The VA mandates an appraisal for all VA loan applications to protect the lender and ensure the property is a sound investment. In contrast, a home inspection is optional, not required by the VA, but strongly recommended for the buyer's protection and knowledge.

Additionally, home inspections are not used to determine a property’s value and are not delivered to the lender. Instead, home inspections are used by the homebuyer to evaluate the condition of a prospective property, allowing them to make a more informed decision about the house they intend to purchase. They offer details about the home’s condition, as well as any repairs that need to be made to the property or its systems.

VA Appraisal Guidelines

The VA orders appraisals for two reasons:

1. To assess the home’s value: Since the VA is guaranteeing the loan, the appraisal must verify that the property is worth what you’re borrowing for it.
2. To make sure it’s safe for inhabiting: The appraisal will evaluate the home against the VA’s minimum property requirements to ensure it meets high-level health and safety guidelines.

To estimate the home’s appraised value, your appraiser is going to look at a number of factors that impact the property’s worth. These include things like its size, features, upgrades and the general condition of the home. They will also take into account other recent home sales in the area, which can help point to a fair market value of the property in the current market.

VA Appraisal Requirements & MPRs

Your appraiser will also look for any issues that might compromise the health or safety of its occupants. To meet these appraisal standards, the property must meet the VA’s minimum requirements (MPRs).

In order to be eligible for a VA loan, a home must offer:

• Access to continuous water supply, sanitary facilities, and sewage disposal
• Adequate roofing in good condition
• No lead-based paint or wood with dry rot, fundus or wood-destroying insects
• Working electric and HVAC systems
• Accessibility from a public or private street
• Proper ventilation in attics and crawl spaces
• Sufficient space for living, sleeping, cooking, dining and other daily activities

There are additional requirements pertaining to encroachments, utilities, zoning and more, but essentially the home must be generally safe for habitation to be eligible for VA financing.

According to VA loan requirements for refinancing a home, appraisals are only required on cash-out refinances. If you’re using an IRRRL—Interest Rate Reduction Refinance Loan—you typically will not need an appraisal.

VA Appraisal Fees

The typical cost of a VA appraisal can range from $525 to more than $1,000. Appraisal fees generally vary by location, home type (single-family vs. multifamily, for example) and the complexity of the appraisal itself. In some cases, the fee may exceed $1,000.

Who pays for the VA appraisal?

The appraisal fee is generally paid by the buyer. These fees are paid directly to the lender or through closing costs at the time of purchase.

It's important to note that while the buyer pays for the appraisal, they do not get to choose the appraiser. The VA or the lender selects a VA-certified appraiser to ensure impartiality and adherence to VA appraisal guidelines.

VA Appraisal Process & Timeline

There are 5 steps in the VA appraisal process:

1. Lender Orders Appraisal

Once you submit your VA loan application and sign a purchase agreement, the lender orders an appraisal from a VA-approved appraiser. This step typically occurs early in the loan process to ensure any issues can be addressed promptly.

They’ll submit an official request via the Department of Veterans Affairs’ online portal, and the VA will dispatch an approved appraiser to the property. Buyers have no say in their appraisers or when the appraisal is conducted.

Appraisals can take a while, so most lenders request one as soon as you’ve put a home under contract. You can check with your loan officer about the status of the appraisal after it’s been ordered.

2. Appraiser Contacts the Seller or Agent

The appraiser, after receiving the assignment, contacts the seller or the real estate agent to schedule a time for the inspection. This inspection is necessary for the appraiser to assess the property's condition and compare it against comparable market sales.

3. The Appraisal is Conducted

The appraiser then visits the property to conduct the appraisal, which includes both a visual inspection to assess condition and compliance with VA minimum property requirements and an evaluation of the home's features and location to establish its market value. The appraiser will take note of any repairs or safety concerns that need to be addressed for the property to meet VA standards.

4. The Appraisal Report is Finalized

After the inspection, the appraiser compiles the findings into an appraisal report, including the estimated value of the property and any necessary repairs. This report is then submitted to the lender. This step typically takes about 10 days, though it can vary based on location, appraiser workload and specific property issues.

5. Lender Reviews the Appraisal

Upon receiving the appraisal report, the lender reviews it to determine if the loan amount is appropriate for the home’s value and if the property meets all VA requirements. If the appraised value is less than the agreed purchase price or if there are required repairs, the lender will discuss the next steps with the buyer, which may include negotiating with the seller, making repairs or, in some cases, reevaluating the loan amount.

How long does the VA appraisal take?

The entire VA appraisal process generally takes about 10 to 21 days, though this can vary significantly based on the appraiser's availability, the complexity of the appraisal and geographic location. Delays can occur if the appraiser identifies required repairs or if there's difficulty scheduling the appraisal.

It's important for buyers and sellers to be responsive and flexible during this process to help ensure a smooth appraisal and to address any issues promptly. Delays in the appraisal process can lead to delays in closing, so timely communication and cooperation from all parties involved are crucial.

VA Appraisal Problems

Two problems could arise with your VA appraisal result:

• The home’s appraised value comes in too low
• It doesn’t meet the VA’s minimum property standards

What happens if the appraised value comes in lower than the sales price?

If the appraisal comes in lower than the agreed-upon purchase price, it can create a gap between the loan amount the VA is willing to guarantee and the price the buyer agreed to pay. This situation may require the buyer to make up the difference in cash.

If you don’t have the additional funds to cover the difference, there are some other options:

• Renegotiate the price: Go back to the seller and see if they’ll accept a lower purchase offer based on the appraisal result. If you update the contract and agree to a new price that aligns with your appraisal, you can continue on with your transaction as planned.
• Ask for a reconsideration of value: When you do this, you’re requesting that the home’s estimated value is adjusted based on comparable home sales not used in the initial appraisal. You can work with a real estate agent to find comparable sales that can help your case.
• VA tidewater appraisal: A VA tidewater appraisal allows the buyer and seller two days to gather information to defend their original agreed-upon price. The appraiser then reviews the information and determines whether or not to change the initial appraised value.

If your appraisal comes in low, be sure to talk to your loan officer and real estate agent. They may have guidance that can help your specific scenario.

What happens if the home doesn’t meet minimum property requirements?

If the appraiser notes conditions that fail to meet the VA’s minimum property requirements, the home will need repairs to address these issues. The buyer and seller must negotiate who will complete and pay for these repairs before the loan can close. This negotiation can delay the process and potentially jeopardize the deal if the parties cannot reach an agreement.

In some limited cases, a lender might allow you to use an escrow account for repairs that the seller would pay into at closing, so you can complete certain repairs after finalizing your VA loan.

Buyers should be prepared for potential issues revealed by the VA appraisal and consider their options, including negotiating repairs, adjusting the purchase price or exploring other financing options if necessary.