We got this comment recently, and felt that it was deserving of a full-page answer regarding the process for a Reconsideration of Value on VA Loans.
“Well, I got my VA appraisal today. It came in $6400 less than the negotiated sales price. I would really like to get this house (its in great shape), but I don’t want to overpay either.
Are VA appraisals generally conservative on their valuation? Is this a common problem with VA loans?”
First off, it’s important to remember that historically the value of a property is what a willing buyer wants to pay. So the question is are you emotionally attached to this home already – is this your dream home, or was it just an Okay property you are willing to walk away from. If it’s the latter – then you may not want to try to renegotiate the offer or see if the appraiser missed something in their evaluation. If it’s your Dream Home – that’s another situation.
Fortunately, when you get a VA Home Loan there’s a process already in place that allows for a formal appraisal review during the loan underwriting. This underwriting review process is formally referred to as a “Reconsideration of Value” and both the Buyer (Veteran) and the Seller can request to have the appraisal reviewed to see if there’s really more value / or the appraiser missed something.
The Reconsideration of Value is used, obviously, when the appraised value of a home is less than its contracted purchase price. According to the National Association of REALTORS, almost one-third of contracts written in the first half of last year had appraisals that didn’t match a sales price (too low). With a FHA mortgage or a conventional mortgage, transactions in which a home fails to appraise for its purchase price often result in canceled contracts.
Because VA Loans have this process already established, it’s much less common for Veteran’s to be in a position to have to break the contract.
How To Appeal a “Low” VA Appraisal
When a VA home loan appraisal value comes in lower than the sales price, the buyer or seller can let us know that they want us to have underwriting do a Reconsideration of Value.
The Reconsideration of Value process is not like asking for a second opinion; there is no new appraisal performed, nor is there an opportunity to use a “different appraiser.”
When you ask for a Reconsideration of Value, through our Bank, we are likely to be referring the details and additional comps to the underwriter. So we need documentation of the facts that may have been overlooked or omitted in the VA loan appraisal new received.
In order to get the Underwriter to consider a higher value than the appraiser, we need the Buyer or Seller to highlight all of the issues with the appraisal and send us a letter, with the comparative sales, or square footage errors that they feel were off on the appraisal. We pass that along to the VA Appraiser with a request for Reconsideration of Value.
Here are the top items we see when someone is Requesting a Reconsideration of Value on VA Loans:
- There are recent sales within 3 miles of the property that were not used were not used by the VA Appraiser
- There were homes that recently sold that WERE used on the Appraisal that are not really comparable homes for some reason the appraiser might not have known (like they could have a newly renovated kitchen that didn’t show up properly in the tax records)
- The Appraiser did not calculate the homes square footage correctly, or miss measured a space. This is particularly “common” with unfinished basements, attics and lofts.
- VA Appraisers do not give much “value” to a new coat of paint. However it could be that they missed an energy-efficient upgrade, or miscalculated the properties age, and that could have an effect on value adjustments
A Realtor who is selling a home generally updates the Seller with their own Comparative Market Analysis (CMA). Buyers get them too. These are often part of the analysis given to you by your Real Estate Agent at the time you craft your offer to purchase. Our Underwriter told us that, “In general, the more relevant, supporting documentation the parties can provide to the VA home loan appraiser, the more likely that the Reconsideration of Value will have a positive outcome.” However, if the CMA was given to a Seller 11 months ago – and the market has moved since then – maybe a foreclosure sold right down the street… the appraisal could be genuine.
Reconsideration Of Value on VA Loans : How The Process Works
Reconsideration of Value requests generally fall into 2 different “buckets.” If the value is less than 10% of what the buyer and seller agreed to with the Sales Contract, our underwriter will send all of the documentation you provide to us, directly to the VA Appraiser who did the work. We ask them to review the additional comments, and data and let us know if they feel they missed something. If they agree, for instance, that the square footage for a particular area was calculated incorrectly – they might ask to go out and re-measure the home. If it’s confirmed they have the choice of letting us know if they are going to change the value – or leave it at the value they originally gave us.
The appraiser does not respond directly to the buyer, the seller or the agent. The VA appraisers in NC on the rotation list will generally send us an additional page to the appraisal stating what they reviewed, and what their findings are. If the appraiser decides NOT to increase the value on the appraisal – then the original value stays in place. Because we don’t choose who the VA Appraiser will be, VA controls the appraisal process, we can not request a second appraisal.
If the Appraisal is more than 10% off, then we gather all of the documentation as before – and send it, with the appraisal directly to the Department of Veteran Affairs Valuation Department, and they are the ones who make the determination about value. Again, if there are substantial square footage issues, we’ve known them to request a re-measurement of the property, generally this is done by a Sr. VA Appraiser in our area.
When the Valuation Department at the VA finishes their review, they will send us a “revised” appraisal. It’ important to remember that we don’t often see them over ride a local appraiser and change the value. Often times, it comes back with the same original value. There’s going to need to be something really, really goofy going on for a VA Appraiser to make a 15% mistake! These guys are PROS. Once the VA gives us their “updated” value that’s the value we must use. There’s no arguing back and forth at that point.
It’s important to remember that a Reconsideration of Value can not be used to get the appraiser to take a “condition” off of the appraisal. If they noted issues with minimum property standards for a VA loan – the VALUE is not the core issue, the lead paint, or where the property is located is your bigger concern. My point being that it’s important to sort out why the appraiser came up with a figure $6400 lower than the Purchase Price. Was it because they missed a recent closed loan, or was it because the house has some serious functional problems?
Bottomline: A request to review the appraisal is not going to override an appraiser’s opinion of minimum property requirements — health and safety standards meant to ensure that veterans purchase “move-in ready” homes.
VA Home Loans : 100% Financing, No Monthly PMI
VA mortgages offer more benefits to military borrowers than just the Reconsideration of Value appraisal review process.
Home buyers using a VA loan can also :
- Buy homes with zero down payment and pay no monthly PMI
- Refinance via the VA IRRRL program — the easiest refinance program available
- Get access to mortgage rates which are often lower than comparable conforming rates
- Have the Seller pay a portion (or all) of your closing costs, which are very low.
Even if you are purchasing a “Bigger” home, and you are going to make a down payment, you might still want to use this program!
Still have questions about Reconsideration Of Value on VA Loans? Let us know! We can help! If you are considering a VA Loans in Rural Communities, and want to know more about qualifying for a VA mortgage loan, please call Steve and Eleanor Thorne, Government Mortgage Loan Experts, 919-649-5058
Hello my name is Lee I have a ? That no one seems to know. With a Reconsideration of Value Grid work sheet. Who is suppose to fill it out? Appraiser? Or Realtor?
Here’s what the Veterans Administration says about how to complete the Reconsideration of Value:
http://www.benefits.va.gov/denver/docs/ReconsiderationofValueRequestSOP.pdf
We recently applied for a VA loan as a way to refinance at a lower rate, now the appraiser used did not include an area that has an egress window as a living space, which has always been a bedroom on the lower level. The appeal was made by us once we received the initial appraisal and it was not included.
What standard does the VA follow in reference to this issue, the appraiser came back out and took documentation that the egress window was indeed behind the curtain and had not notated as such at the time of the first time out here. Thanks frustrated in Kansas
Harold – I know how frustrating this must be. The BEST course of action is to contact your local Veteran’s Administration office. There is a procedure that the Veteran’s loan officer is required to follow. I’m not sure that simply having a window, at least in NC makes the room a bedroom. I know for a fact in my Great Grandmother’s house there was only one closet – because when the home was initially built they were taxed based upon bedrooms, and that was determined by closets (probably also why my family has so many armoires!)! Sorry I can’t be of more help, again you might start with the loan officer working with the Veteran, then the Veteran’s Administration.
Hello! My husband and myself are in the process of appealing an appraisal on a house that we just LOVE. The Appraisal came in about $20,000 under, and the comps used were…well, apples to….bananas (if you know what I mean), and our underwriter agrees that something is way off. So, My file is now at the VA Regional’s office, and it has been nearly 4 weeks with us waiting for a response. Now, don’t get me wrong, it will be well worth the wait if all goes well, and I know everyone is busy, but….do you happen to know roughly how long it takes for the completion of this process?
Your input would be most helpful.
Thank you
~Erin~
Erin, unfortunately there’s no way for us to know either. The USDA Underwriters give us a recorded message that tells us what day they are working on. The Veteran’s Administration does not. It could be that the Veteran can call and inquire what day they are on. Seems reasonable. GOOD LUCK!!
Our VA appraisal came in at $35,000 under purchase price. This is not a mistake, but gross incompetence. How can you expect a deal to continue with that valuation difference? From reading the article and comments, it sounds like the appraiser just screwed three families out of their homes. We are requesting a ROV, but based on what I’ve read over many websites, it sounds like this process is flawed unless you are buying a house that is a piece of junk way below market value. Congratulations.
I’m sorry you are experiencing a problem. The ROV process is generally a good system, that takes into consideration recent closed sales. Good Luck
Hi Eleanor,
I have to add another grossly under appraised property to this list. I am a realtor in Florida with a buyer who had an appraisal come in $50,000 below the contract price. Sorry for my frustrating comments but we are all in disbelief on this one. As some of the other comments have stated, they did not use accurate comparables to begin with – I thought it was an irresponsible appraisal. This is a totally renovated home with new roof / AC, upgraded finishes, impact windows and doors, and the appraiser used inferior properties that had some renovations or none. He did not even include higher end comparable sales that bracketed the contract price. It is an active 55+ community and there are still some low sales from foreclosures and this home is actually a flip where the seller purchased it for a very good price, but that has nothing to do with the value. Sales run from under $100k to over $250k. He stated it was a declining market when it was actually an increasing market. I understand the effect of foreclosures on value in a community but if there are higher traditional sales as well, the appraiser does not have to put more weight on the foreclosure prices. The lender submitted a Reconsideration of Value and the VA said they would respond in 10 days. You are stating that because this would be more than 10% difference it does not even go back to the appraiser – it is the VA that decides on the Value? What happened to appraisal guidelines that appraisers have to abide by? This is my first VA loan and I am learning about it as I am researching now. Considering these other large differences from your comments, I believe the VA and their appraisers lean more heavily on any factors that support a lower price – flips, foreclosures, no true support for higher upgrades even if other sales support them and buyers will pay the price, and which conventional deals would acknowledge correctly. It looks like it is better to stay away from properties at the higher end of the market because they will never appraise.
Hi Eleanor,
My apologies for my harsh comments but I think this appraiser knew exactly what he was doing.
I have been reading through some of your other articles – you have a great site and a lot of information – and this one below states that there can be another appraisal done and paid for by the Buyer if there is a Reconsideration of Value? Is this still the case right now? Your article above doesn’t state this. I should have included the full listing mls sheet and all the pictures of the comps used and the ones we suggested when we sent in our information. This Valuation Department has no way of comparing the properties because they don’t have access to the mls and pictures that the appraiser does correct? Since we are in the middle of this ROV process can we still request a 2nd appraisal?
https://ncfhaexpert.com/va-loans/who-pays-for-veteran-home-loan-appraisals/
Hi Evelyn,
We have an update to the above transaction – the appraiser submitted a revised appraisal on Friday, the 14th that was $40,000 higher than the original appraisal, which was where we all thought the value was. it took him 1 week to respond. We have no idea what his thinking was on the first one, but he came up to an accurate appraisal on the revised one – so it happens. The buyer had a relative who was an appraiser so he wrote the explanation for the comps that should have been used, so that may have helped, but the entire response came from me.
Hopefully you will publish all the comments I made – his original reasons may have been any or all of the above and customers should try an ROV with as good details as possible.
I am currently closing on a Condo in San Antonio, TX using the VA Loan (Primary Residence). The market is very hot right now and at peak prices (Fast Seller’s Market). The list price was $135K and I was the first offer on day 1 of listing at $138K. The property received multiple other others in the next 2 days at and above list prices. I won the bid since I was first and above list before the multiple others. The VA Appraisal cost $440, took 12 business days to get the results and the Appraisal is $16K below price! That’s 11.85% lower than the list price! My lender, broker and I have submitted comps (which there are many recent in such a large city) to show but the amount remains. How on earth is the market value not set by the multiple and above list offers, and recent comps to support the prices? I can’t get any property in my area for the $122K the appraisal came in at, NONE, zero. Not even remotely close. I will pay the difference out of pocket because the VA is so out of touch with reality and that number is zero reflection of the actual values. I have to say it is so disappointing the be forced to pay for a “service” that is so out of touch. I could resale the same property tomorrow for at least what I paid, since there are several other offers that came in as well. I am a proud Veteran, but after all my research and concerns before using the VA loan process, I will NEVER use the VA loan again, nor will I sell to to VA loan buyer (which really hurts to say), nor recommend to any other military folks. I will eagerly go with FHA or conventional for future home purchases to avoid my “benefit”. Truly a shame on the VA.
I’m sorry you are experiencing this. In many markets that are increasing, the appraised value is not keeping up with the actual value that home buyers and sellers see in a piece of property. I’m not suggesting that is the case here, as I have not seen the appraisal. Again, I’m only pointing out that we’ve had appraisal issues here with other types of loans as well. Best of luck.
Do you know what the limit is on an appraisal being done in nc with a va loan? I was told that legally, they have no more than 15 days to do it here. can you confirm this for me?
We are in the process of selling our home in Killeen Texas. We received an offer after our home was on the market for 3 weeks. The buyers were approved for a VA loan and offered asking price. Well, we received some devastating news that the VA appraisal came in $20,000 less than the asking price. I am a veteran as well, and feel insulted because the appraiser did not come into my home to see if any home improvements were made. We submitted an ROV and now we are playing the waiting game. I truly understand that the VA wants to protect Veteran home buyers, but what about the Veteran sellers. The same system used to protect the Veterans is the same system that is failing them as well. Who should I complain to because after doing the research…THIS IS A BIG BIG ISSUE!!!!!!!
I don’t know that it would be “legally” but I think that is the general guideline for VA Appraisals.
So sorry you are going through this. It is tough.
Hi,
Just wondering how your ROV went. Was your appraisal increased or did they leave it the same?
like everybody else, my appraiser’s incompetence is hurting me. This appraisal was for cash out refinance at a lower rate and it came back about 20k low which is about 7.5% low. The report is riddled with errors an discrepancies. I put together a detailed document with all errors, often citing the VA Ch11 appraisal requirements document. The appraiser was unable to walk up and down stairs so his daughter completed the entire inspection and did all the work.. Knowing all of this do you think i would be better off bumping my ask up to 10.1% so that it goes to the VA instead of back to the appraiser. I think they will see the errors and disregard of ch.11 requirements, where he would take offense and leave it as is or come up with reasons to not change. i cant decide whom my chances are better with. any opinion.
high level of issues with report:
-Failed to disclose the professional assistance he received from an unlicensed appraiser whom at a minimum handled all in person inspection aspects of the property – per VA Pamphlet 26-7, Revised Chapter 11: Appraisal Requirement
-All appraisals are 6-12 months old in an area with rapidly increasing market value. 6% annual appreciation in neighborhood and 9.8% appreciation in the building
-Appraised 12K lower then 2015 sale price of a smaller non updated comp with one less bathroom located in same building.
-All 3 comps in report contained inaccurate information: size/sqft, bathroom count, and distance from property (put as same sqft and bathroom count as my property, when 2/3 comps were smaller with only one bathroom, 3rd comp was located in different neighborhood in urban area.
-Incorrect neighborhood boundaries used
-Numerous errors and/or discrepancies listed throughout the entire report & addendum
-Multiple comps available that were sold within in the last 3 months, similar to subject property’s loft style and overall condition, and located in much closer proximity to the subject property
-Does not account for rapid growth, development and appreciation of subject properties neighborhood:
any advice would be greatly appreciated. If you want to see or have time to review the full doc. I prepared in detail, happy to send to you.
Thanks,
Colin
You need to be certain your Loan Officer has this to be able to present it to the VA. That’s the process – and it usually works 🙂
Hi, Isabella. Did the VA allow a second appraisal? I can’t find anything about that online. My husband and I are buying a house and going through something similar. Our realtor has requested a second appraisal, stating that the first was biased due to a personal issue the appraiser has with the seller. We’re on pins and needles waiting to hear from the VA. It has put a damper on the holidays.