I experienced a ‘First‘ in my real estate career the other day.
In my 10+ years as a professional agent, an appraisal for one of my listings here in Kitsap County WA came in ‘under‘ value. In other words, an appraiser was sent out to determine if the home they were buying was worth what they had agreed to pay my Sellers. Unfortunately, the Appraiser’s NOV (Notice of Value) resulted in a rather substantial shortfall.
Did I mention that the Buyer’s are using VA financing?
Yes, that’s right, the Curse of the VA Appraisal STRIKES Again!
For those of you familiar with my articles here on SBB and over on ActiveRain, you know that I’ve written on this topic on a number of occasions, such as:
I feel very fortunate to have gone so long without any of the homes I’ve marketed and sold have an appraisal come back ‘under’ value. Now part of that is probably just sheer luck. But a big part of it is the pride I take in understanding and knowing our local real estate market, and pricing my listings at or near market value.
So when this particular appraisal came up short, I was surprised, to say the least. Well, shocked was more like it. No, I was really pissed!
Maybe you’re in the same boat and that’s what’s brought you to this article. You’ve come to the realization that “VA Appraisals are like a Box of Chocolates – you never know what you’re gonna get!”
What are your options as a Seller when a VA Appraiser’s Notice of Value comes in low?
1. You can agree to lower your sales price to the lower appraised value, and move forward to closing (certainly the easiest resolve, but not always the most financially prudent).
2. Have the Buyers make up the difference in ‘cash’ at closing, or negotiate/agree to share/split the difference (unfortunately, in a slow market (Buyer’s Market) it can be rather difficult convincing the Buyer to be generous).
3. You can Request a Change to the NOV. Some call this a ‘Reconsideration of Valuation‘ or ‘Challenging‘ the VA Appraisal.
Personally, I don’t like using the term ‘challenging’.’ It comes off as being somewhat ‘adverserial’ in nature, and the last thing you want to do is alienate or upset the VA Appraiser!
In the VA Pamphlet 26-7, Chapter 13, pages 26-28, it states that the NOV can be changed if either the change is clearly warranted and fully supported by real estate market or other valid information considered adequate or reasonable by professional appraisal standards, or, the issuance of the NOV involved fraud, misrepresentation or substantial VA or lender administrative error.
Your Listing Agent should be able to help formulate any supporting documentation necessary for submitting your Request of Change. Most Listing Agents normally prepare a detailed Comparative Market Analysis for their Sellers to guide them in determining market value/listing price.
The Sellers can also elect, at their own expense, to have another professional appraiser, not assigned by VA, to conduct an additional valuation, and supply that information to the Lender for consideration.
The Request of Change to the NOV must be made in writing and should be submitted to the Buyer’s Lender. The Buyer’s Loan/Mortgage Officer should be able to provide you with a fax number or email address for the Lender so you can submit your documentation directly to them.
Once the Lender receives your Request for Change, they will normally forward it onto the VA appraiser originally assigned to the file, but only if it involves a value increase of more than 5% but less that 10%. If the Request for Change involves a value estimate of more than 10%, the Lender forwards the Request onto the VA Regional Office of Jurisdiction.
Unfortunately, there is no guarantee that the VA appraiser will amend or change their original valuation findings based on any supporting documentation you provide. In the end, their say is final, and their appraisal remains in effect for a period of 6 months. This means that if you decide to terminate the contract, and put your house back on the market, any subsequent Buyers using VA or FHA financing will be required to use the low appraisal. This can have a significant negative impact on the marketability of your home and effectively reduce the pool of potential Buyers.
All the more reason for you to build a strong, persuasive case for a value increase using solid, reasonable market data.
Have an appraisal question for VA? Click HERE and go to your respective State, where you can email your question to the VA Regional Office for your area.
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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, ActiveRain, Crabbing in the Hood, Facebook, Twitter, or e-mail: firstname.lastname@example.org