We had some questions recently about what is covered on the VA Appraisal, specifically, the VA Notice of Value or NOV. The NOV is a very important piece of the appraisal process. It establishes the value determination and covers specific property conditions which need to be addressed in order to close the loan. Every VA appraisal must be reviewed by a SAR to confirm the information provided is accurate and all conditions are met.
Some things to remember about the VA Notice of Value or NOV:
- Before alerting a borrower that a VA appraisal is in and looks good, we need to wait until the SAR has issued the NOV. Meaning, The NOV is the FINAL document from the VA stating the Value.
- As with a VA appraisal, a NOV is valid for six months.
- A pest inspection is required for all purchases and cash-out refinances, if applicable for the state. In North Carolina, we do not have a high concentration of pests, and the VA does not require a Termite report in NC. However, most Underwriters WILL make it a requirement If for some reason the Veteran does not wish to have an inspection done, we can have this waived
- When a Well is present, a water test is always required
- Inspections are valid for 90 days.
- On proposed or under construction cases, if the local authority doesn’t issue a Certificate of Occupancy or equivalent and cannot provide evidence of the required inspections throughout construction, a 10-year insured protection plan will be required, (along with the standard 1-year VA builder’s warranty).
- For cases completed as built less than 1-year and never occupied, the standard 1-year VA builder’s warranty is required.
VA requirements include a stipulation that the lender maintains a copy of the VA Notice of Value for at least 24 months after the loan is closed. Appraisals are considered part of the loan record, and as such are included in the rules listed in VA Pamphlet 26-7. “Lenders must maintain copies of all loan origination records on VA guaranteed home loans for at least two years from the date of loan closing. Therefor, if you are considering a refinance, and you can’t find your copy of the VA Notice of Value, contact us back, and we’ll be glad to help you evaluate a refinance.
What does the VA Notice of Value Cover?
Energy Conservation: For existing properties, a borrower may contact the utility company, or a reputable firm, for a home energy audit to identify needed energy-efficient improvements, such as: solar or conventional heating/cooling systems, water heaters, insulation, weather-stripping/caulking, and storm windows/doors, or other energy related improvements. The mortgage may increase by up to $3,000 based solely on documented costs; or up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs; or more than $6,000 subject to a value determination by VA.
Lien Supported Assessment: When the property is in a development with a mandatory membership in a HOA, we must ensure title meets VA Notice of Value requirements and the HOA assessments are subordinate to the first mortgage.
Condominium Requirements: We must ensure the condo is acceptable to VA and that any condo related special conditions or requirements are satisfied.
Site Condos look just like a traditional, platted subdivision. Lot sizes, quality of homes and zoning restrictions are all identical. The only differences are technical – sites are divided and recorded by condominium documents rather than a plat.
Water / Sewage System Acceptability: Evidence from the local health authority or other source authorized by VA that the individual water supply and/or sewage disposal system are acceptable.
• A water quality test is required anytime there is a well present and hook-up to public water isn’t available.
• Septic inspections are not required unless the Appraiser notes specific issues with the septic (usually an order or seepage).
• With a purchase, some states require a septic inspection, regardless if the Appraiser notes an issue or not.
Connection to Public Water / Sewage: Connection to public water and/or sewer is required when hook-up to public utilities is available/feasible, and if the local municipality requires. If the local municipality doesn’t require hook-up, the VA Notice of Value will not require it.
Private Road / Common-Use Driveway: The use of a private road or common-use driveway must be protected by a recorded permanent easement or recorded right-of-way from the property to a public road and a provision for continued maintenance must exist.
• Each property must be provided with a safe and adequate pedestrian or vehicular access from a public or private street.
• Private streets must be protected by a permanent easement and maintained by a homeowner’s association or joint maintenance agreement.
• All streets must have an all-weather surface.
Flood Insurance: Flood insurance is required if any portion of the dwelling/improvement is located in a special flood hazard area (SFHA).
Note: VA will accept either FEMA’s NFIP or private flood insurance. If the property is not in an area eligible to obtain flood insurance through FEMA’s National Flood Insurance Program (NFIP), the borrower may obtain a private flood insurance policy to cover the condition of the VA Notice of Value.
Community Water and Sewer Systems: When the property is served by Community Water and/or Sewage, we must verify the facilities are approved by the appropriate state or local public utility and health authorities. Typically the Appraiser will verify and comment on the report.
Airport Acknowledgement: The appraisal report must identify any airport noise zone or safety-related zone in which the property is located.
If applicable, the borrower must acknowledge that they are aware that the property is located near an airport and the aircraft noise may affect livability, value and marketability.
Repairs: We must be sure all required repairs are completed.
New Construction Acknowledgement: Borrower is aware that the home wasn’t inspected by the VA during construction.
New Construction 10 Year Protection Plan: We must ensure enrollment of the new property in a 10-year insured protection plan acceptable to HUD.
• On proposed or under construction cases, if the local authority doesn’t issue a Certificate of Occupancy or equivalent and cannot provide evidence of the required inspections throughout construction, a 10-year insured protection plan will be required, (along with the standard 1-year VA builder’s warranty).
• For cases completed as built less than 1-year and never occupied, the standard 1-year VA builder’s warranty is required.
Energy Efficient Construction: We must obtain the builder’s certification which identifies the new dwelling and states that it was constructed to meet the energy conservation standards of the Council of American Building Officials (CABO) 1992 Model Energy Code (MEC).
Lead Water Distribution System: We must obtain the builder’s certification which identifies the new dwelling and states the solders and flux used in construction did not contain more than 0.2% lead and that the pipes and pipe fittings used did not contain more than 8.0% lead.
Construction Warranty: The builder must provide the Veteran home buyer with a 1-year VA builder’s warranty (even if a 10-year insured protection plan is to be in place).
When the new home was built less than one year ago and never occupied, the Veteran has a choice between and the standard 1-year VA builder’s warranty.
Note: The 1-year VA builder’s warranty is actually more inclusive in terms of what is covered.
Who Can Pay for the VA Appraisal, VA Notice of Value, or NOV:
• The veteran can also pay for a second appraisal if he or she is requesting reconsideration of value.
• The veteran cannot pay for an appraisal requested by the lender or seller for reconsideration of value.
• The veteran cannot pay for appraisals requested by parties other than the veteran or lender.
The last two items in that list are important to remember–there’s a difference between being required to pay the fee for a mandatory part of the VA home loan process–the appraisal and/or compliance inspection–and an optional part of the process requested by someone other than the borrower. So if the SELLER, for instance, is asking for a second appraisal… that would be on the SELLER to pay for it
If you have other questions about the VA Notice of Value, or NOV, OR a part of the VA Home Loan Appraisal, please call Steve and Eleanor Thorne 919 649 5058 We appreciate your service, and want to be a great resource for your purchase.