One of the best things about living here on the Kitsap Peninsula in scenic Washington State is that we have the good fortune of being part of a very large and thriving military community. Our area is home to thousands upon thousands of active-duty Armed Forces members faithfully serving our Country, along with their dependents, and many retired veterans as well.
Under the collective command of Naval Base Kitsap, there is the Puget Sound Naval Shipyard in Bremerton; the Naval Undersea Warfare Center in Keyport; and the expansive Bangor Submarine Base. As a licensed real estate professional serving clients throughout Kitsap County WA, I have had the good fortune and pleasure of working with many of these hard-working, dedicated patriots and their families.
A good many of my active military or veteran clients elect to use VA loans for their home financing. As a veteran myself, my first two homes were purchased using VA loans. It can be an excellent choice of financing products to use, requiring very little out-of-pocket expense, and with fairly competitive rates.
However, one of the potential drawbacks or difficulties associated with VA financing can be the appraisal process. Simply being aware of this possible pitfall helps to prepare my clients ahead of time. It’s something that I always take time to educate my Buyers about fully.
Here is the process in a nutshell:
As a Buyer, your agent diligently assists you in finding a home that meets your needs. Once you find the right home, you submit an offer, and hopefully, your offer is accepted. At that point, you hire a licensed inspector to conduct a full home & pest inspection, and identify any items that need to be addressed/repaired. After the inspection results are negotiated to the satisfaction of both Buyer and Seller, you will enter the “pending” stage of the transaction. At this point, your Mortgage lender will contact VA, and they, in turn, will order an appraisal to determine if the property can be valued at the price that you have agreed to pay for it.
Here in Kitsap County WA, our mortgage partners rarely know who the appraiser will be in a given transaction. It’s a Russian roulette. If you’re an approved VA appraiser in Washington State, your name is simply added to the list, and whoever is next on the list gets the call. It may be someone local who knows and understands the nuances of our market. Or it can be someone from another county altogether.
In most of my experiences, the VA appraisers have been fair and reasonable. But there are times when they can be extremely picky or subjective. Usually, they try to stay focused mainly on major structural components and primary systems. They evaluate the roof, foundation, plumbing, electrical, heating/cooling, etc.. Unfortunately, on occasion, they can become overly critical of other aspects of the home that are not necessarily critical to safety or proper function/operation. These aspects then become ‘conditions for funding’ and require resolution before the transaction can close.
Many Buyers assume that since the home inspection was performed, and the Sellers may have agreed to repair the things they requested, that everything is pretty much a “done deal” until closing. Unfortunately, there may be some additional items that the VA appraiser will call out that need to be remedied or repaired prior to closing. In some instances, these items can be small and easy to resolve, or they can present significant challenges and even cause the transaction to fall apart.
Additionally, in a slower, declining market, appraisers tend to be much more critical in their analysis of comparative property sales. Valuations can come back ‘under’ value and may require a re-negotiation of the contract sales price between Buyer and Seller.
An experienced real estate agent will wisely counsel their Buyers not to assume anything and to wait until the full appraisal results come back. Hopefully, the appraiser will not find any problems or issues that were not identified during the home inspection, and the appraisal will come in at value. If that’s the case, then the rest of your home buying experience should move along fairly smooth to closing, and you will successfully achieve the Next Adventure in Life!