The VA Loan Process is a little different than other loan programs. One major reason is that the VA still requires a lender to use a Veteran Association approved Appraiser. The Appraisers are generally very “experienced” and their revenue is set according to the VA – not what the “market” in that area pay for an appraiser, or what the Bank is willing to pay.
The instructions to the VA Appraiser is fairly limited – the VA simply requires the property to be in a livable condition. This “livable” requirement is unique to VA loans.
Does it mean that the VA is making it easier for Vets to purchase distressed property? Ugh, no. Although, VA Loans can also be used to purchase foreclosures, Short Sales and Bank Owned homes too!
The vagueness of the term “livable” can unfortunately add some concern for first time home buyers and sellers because they are not sure what repairs might be flagged by the appraiser as needing to be fixed as they negotiate the contract.
The VA Lenders Guide has an entire chapter dedicated to Minimum Property Requirements, but it is actually a very short chapter and most of the details do not apply to 90% of homes. Instead, there is a catch-all paragraph at the beginning that nearly all repairs are generated from. That requirement is for a home to be Safe, Sound, and Sanitary.
VA Appraiser Must Certify the Home is Safe:
As a rule of thumb, if you think that a property is unsafe, then the VA Appraiser probably will agree.
Other examples might be: exposed wires, missing railings around an elevated deck or stairs, no smoke detectors, and peeling paint in an older home (lead paint issues).
VA Appraiser Must Certify the Home is Sound:
If part of the house is not there, then it needs to be. Bathrooms without toilets are not bathrooms. Other examples would be: missing flooring, broken windows, exterior doors that will not lock, and cracked slab foundations.
Kitchens can be a gray area, but the general rule is that they need to have all the “built-in” appliances. If there is no refrigerator there is no problem, but a built-in double oven needs to be where that big hole is. (Generally, VA Appraisers are going to follow most of the Repair Requirements of a FHA Loan)
VA Appraiser Must Certify the Home is Sanitary
Distressed property with dog poop everywhere – isn’t Sanitary…
If the carpet looks like it would grow if you watered it, or if there is mold all over the bathroom, then you have problems. Sanitary should not be confused with clean. Houses are very often dirty and have obvious stains, worn out carpets from the traffic patterns, and cobwebs in every corner. That’s just a filthy house, not an unsanitary one.
When Repairs on a VA Loan Must Be Completed
You might find a home, feel like all of the issues are ones you, or your family, can fix… believing it’s a Great Deal and go forward with the contract.
The challenge with VA loan required items is they must be corrected prior to closing. The only exception to that is if the weather makes the repair impossible (correcting a septic issue in North Dakota in January for example).
Since these repairs are not typically identified until after the contract is signed, it brings up the question of who should pay for those repairs – and do you want to make all of the repairs prior to actually owning the home.
Anyone can pay for a required repair (buyer, seller, agent, etc). However, it often means paying for fixes to a house that is not a fully done deal. That is a risk, but if it is a question of adding $40 worth of smoke detectors, that is usually no reason to not use VA financing.
The problem is when there’s a major problem like a cracked slab, gutted kitchen, or major mold. Those are often properties that a buyer should avoid using VA financing for.
If you have questions about using your VA Loan Benefits to purchase a home in NC, please call Steve and Eleanor Thorne 919 649 5058 we would love to help! Using your Benefits you can use VA Loans to buy distressed homes in NC