What Every Home Seller Should Know About VA Financing & Appraisals
Veteran buyers in the United States have been using VA home loans since the program began to offer assistance to returning veterans of World War II and their dependents. With WWII long past, the United States Department of Veterans Affairs has continued to offer this program to military families for more than seven decades and helped hundreds of thousands of veterans and military families become homeowners. But even though the VA home loan program has been a resounding success, many home sellers continue to shy away from working with buyers who want to use this type of financing because of some common misconceptions that have persisted over time regarding the appraisal process.
Understanding the VA appraisal process and the use of MPRs
Most home sellers want and need their homes to attract a good buyer and close quickly with little or no issues that threaten to stall the sale or cost the seller more money. Because of this, some home sellers worry about the VA appraisal and how their home will fare during this necessary step of any VA loan-based home sale.
While VA appraisals do scrutinize the home and assess property conditions according to Minimum Property Requirements (MPRs), homes that have been well maintained are rarely found to have serious issues during this process. The use of MPRs are included in the VA appraisal process to standardize it and help to protect military veterans and their families from purchasing a home that will be too expensive for them to repair or maintain and ensure that the home they choose is safe for occupancy. Since a significant portion of the veterans who utilize the VA home loan financing program may be living with some type of disability caused by their service, this vetting process helps to ensure that their home ownership experience remains positive long after the purchase is complete.
MPRs explained
In most cases, a home will meet these VA appraisal guideline requirements if it:
- is a residential property
- has adequate space for basic living requirements, such as sleeping, cooking, living, and taking care of sanitary needs
- has working mechanical systems that are in good repair and are expected to remains serviceable for a reasonable amount of time
- has adequate heat, hot water, drinking water, and a safe method of sewage disposal
- has an adequate roof that is in good repair and an expected reasonable lifespan of continued use
- adequate crawl space access and no excessive moisture in these spaces or in basements
- independent utility service for each unit, if the property is a multi-family property
- safe access from the street or road, such as a private driveway or permanent easement for the purpose of access
- no drainage issues on the property capable of allowing water to pool near the home or foundation
- no potential hazards noted by the appraiser
- no termites, dry rot or fungus issues
- no lead-based paint issues, such as cracking or chipping lead-based paint
- no defective construction, workmanship, or condition issues such as settling, moisture issues, or decay
In most cases, a home that is carefully maintained will not be found to have issues of this type, but sellers who want to be sure can ask their agents to refer them to a reputable building contractor who can examine the property for these types of defects.
Dealing with VA appraisal issues
Homeowners who are working with a VA buyer and do receive the disappointing notice that their home has failed to meet the MPRs have several options to consider. These include:
- offering to pay for the necessary repairs or renovations to keep the sale on track
- offering to help the buyer pay for repairs or renovations to keep the sale on track
- allowing the buyer to pay for their own repairs and renovations to keep the sale on track
- terminating the contract to begin looking for another buyer
In most cases, sellers who take the advice of a skilled, experienced real estate professional can often negotiate a fair agreement to remedy any issues found on the VA appraisal. Doing this is usually far more productive than terminating the contract, which can place sellers in the uncomfortable position of having to disclose the same issues to other prospective buyers. Taking steps to satisfy the VA buyer by addressing the appraisal issues quickly and fairly is often the fastest way to a successful sale.
Additional questions about VA financing, including what to do when the valuation comes in low, should be directed toward the seller’s listing agent or a reputable lender in the area.
