Once a seller has accepted your offer on a home, it’s time for the VA appraisal. During this process, a VA-approved appraiser will assess the property’s value to determine how much a lender will finance.
A VA appraisal should not be confused with a home inspection, as these are two different stages in the VA loan process.
The VA home inspection is optional and can determine a home’s existing or potential issues, while the VA appraisal is required and ensures that the property meets all of the Minimum Property Requirements (MPRs) established by the Department of Veterans Affairs.
Let’s take a look at how VA inspections are different from VA appraisals and then explore the appraisal requirements for a VA loan.
VA Appraisal vs Inspection
The main goal of the VA appraisal is to assess the value of a home to ensure it meets the loan amount for a VA loan. An appraisal is required for all VA purchase loans.
A VA home inspection is a more thorough inspection of home systems and aims to provide a detailed report on the condition of the home, listing any current or potential problems. It is not required by the VA but is highly recommended.
The table below highlights the primary differences between a VA appraisal and home inspection:
|Assess the home’s condition and identify potential problems/hazards with the property
|Assess the property’s value and ensure the home is safe, sanitary and structurally sound
|Required by the VA
|Not required by the VA but recommended by most lenders
|Ensures safety of home, satisfies VA appraisal requirement
|Ensures safety of home, may help buyer renegotiate home
|Narrow focus: targets VA’s minimum property requirements
|Assess the property’s value and ensure home is safe, sanitary and structurally sound
|Determined by VA appraisal fee: typically $350-$700, but varies by state of purchase
|Determined by provider: typically $300-$500, but varies by location and property
VA Minimum Property Requirements (MPRs)
The Department of Veterans Affairs implements a set of minimum property requirements (MPRs) to ensure that homes financed by VA loans are safe, structurally sound, and sanitary investments for Veterans and military families.
During the VA appraisal, the appraiser will evaluate the property, ensuring it meets all applicable MPRs. Notable MPRs to keep in mind include:
- Working electric, heating, and cooling systems
- Adequate roofing
- Sufficient sizing for basic living necessities
- Clean, continuous water supply
- Sanitary facilities
- Lead-based paint-free surfaces
- The absence of wood-destroying insects, fungus, and dry rot
- Safe and sanitary sewage disposal
- Accessibility from an all-weather public or private street
- Attics and crawl spaces must be accessible and properly vented
These requirements cover various aspects of location, infrastructure, and safety and are designed to create a secure environment for homeowners. A complete list of VA MPRs can be found below in the VA appraisal checklist.
The VA will not approve the loan if a home does not meet these MPRs. However, in some cases, the VA may consider waiving MPR repairs or permitting the borrower to address the repairs after the loan closes.
VA Appraisal Checklist
- The property must have access from a public or private street with an all-weather surface.
- Private streets must have a permanent easement and be maintained by an HOA or joint maintenance agreement.
- Each living unit must have independent access without trespassing on adjoining properties.
- Rear yard must have independent access without passing through any other living unit.
- Adequate space between buildings for exterior wall maintenance.
- The property must be a single, readily marketable real estate entity.
- The primary use of the property must be residential.
- Non-residential use must not exceed 25% of the total gross floor area.
- Each unit must have suitable living, sleeping, cooking, and dining facilities.
- Shared facilities such as laundry, storage, and heating are allowed in 2-4 unit buildings.
- Utilities (water, sewer, gas, electricity) must be independent for each unit.
- Mechanical systems must be safe, protected from destructive elements, and of adequate capacity and quality.
- Heat must be adequate for healthful and comfortable living conditions.
- Wood-burning stoves must have a conventional system to maintain at least a 50-degree temperature in plumbing areas.
- Solar systems must have a backup system that provides equivalent utility.
- Unvented space heaters and fireplaces must meet additional requirements set by the VA or the LAPP Lender.
- Each unit must have adequate electricity for lighting and necessary equipment.
Water and Wells
- Each unit must have a continuing supply of potable water and domestic hot water.
- Connection to public water is required whenever feasible.
- Water quality must meet local health authority or EPA guidelines.
- Shared wells must be capable of producing adequate water for each property simultaneously.
- Permanent easements and well-sharing agreements are required for shared wells.
- Community wells must meet health department approval.
- Approved cisterns are accepted when public water is not available.
Sanitary Facilities and Sewage
- Each unit must have sanitary facilities and a safe method of sewage disposal.
- Connection to public sewer is required whenever feasible.
- Individual and community sewage disposal systems must operate properly.
- Pit privies are permitted if customary and installed according to local health authority requirements.
Roof and Ventilation
- The roof must prevent moisture entry and have at least five years of remaining useful life.
- Adequate natural ventilation is required in attics and crawl spaces.
- Crawl spaces must have proper access, ventilation, and be clear of debris.
- Floor joists in crawl spaces must allow access for maintenance and repairs.
- Conditions impairing safety, sanitation, or structural soundness must be corrected.
- This includes defective construction, poor workmanship, excessive dampness, leakage, decay, settlement, termites, and other issues.
- Lead-based paint must be corrected on homes built prior to 1978.
- The property must be free of hazards that may affect health, safety, or the customary use and enjoyment of the property.
- Hazards include subsidence, flood, erosion, and proximity to high-voltage electric transmission lines and gas or petroleum pipelines.
- Compliance with local zoning ordinances and building codes.
- Compliance with local housing and planning authority code enforcement.
- All units must have access to safe drinking water, sewer, gas, and electricity.
- Appropriate water supply, sanitary facilities, and sewage disposal for each unit.
- Compliance with special requirements for manufactured or modular homes.
- Consideration of potential environmental problems, mineral reservations, and airport proximity.
Is it hard to pass a VA appraisal?
Passing the VA appraisal depends on the property’s condition and adherence to the VA’s minimum property requirements. Properties that are well-maintained, safe, and in overall good condition typically pass smoothly. However, significant issues like structural damage, safety hazards, or major defects can pose challenges, often requiring repairs or remediation to meet the standards.
The VA appraisal’s primary objective is to ensure the property is safe and suitable for the borrower. Though it may present some requirements and challenges, its purpose is to protect the homebuyer’s interests.
What can a VA appraisal fail?
A VA appraisal may fail if the property does not meet the VA’s MPRs. Some common reasons for a failed VA appraisal include the following:
- Structural issues: Significant structural problems, such as foundation issues, severe cracks, or unstable construction, can result in a failed appraisal.
- Safety hazards: Safety hazards, such as faulty electrical systems, unsafe stairways, or inadequate smoke detectors, can lead to a failed appraisal.
- Sanitary concerns: Issues with water supply, sewage disposal, or sanitation facilities can cause a failed appraisal. This includes problems with the water source, plumbing, or improper sewage disposal systems.
- Major defects: Any significant defects that affect the property’s habitability, soundness, or value can result in a failed appraisal. This may include issues like extensive water damage, mold, or significant pest infestations.
- Non-compliance with local building codes: The property may fail the VA appraisal if it does not meet the local building codes or zoning requirements.
It’s important to address any issues identified in the appraisal report to ensure the property meets the requirements for a VA loan.
What happens if a VA appraisal fails?
Suppose the VA appraisal determines that the property does not meet the VA’s MPRs. In that case, the property is not considered safe, structurally sound, or sanitary enough to qualify for a VA loan. The VA will only approve the loan on that property if the issues identified in the appraisal report are resolved.
The borrower has a few options when the VA appraisal fails:
- The property owner can agree to make the necessary repairs to bring the property up to the VA’s MPRs. Once the repairs are completed, a re-inspection will be conducted to ensure compliance.
- The borrower can request a waiver of the MPR repairs from the VA if the property is deemed safe, structurally sound, and sanitary enough to be occupied. The lender and the VA must agree to the waiver, and it’s often helpful to provide an appraisal report from a licensed professional to support the request.
- The borrower may look for another property that meets the VA’s MPRs.
Low Appraisal Value
If your appraisal comes in low, you can ask for a Reconsideration of Value (ROV) from the VA. An ROV is the formal process of appealing a low VA appraisal after the appraiser makes their determination.
A reconsideration isn’t always effective, and negotiating with the seller may be a better option. However, some sellers may not want to lower the purchase price in a competitive market.
Wrapping Up VA Appraisals
Understanding the VA’s minimum property requirements and the need for a comprehensive appraisal process is crucial for prospective homeowners seeking VA loans. However, it does not substitute for a home inspection. By obtaining a home inspection and an appraisal, you can ensure that your dream home is indeed a safe, sound investment.