Discovering Damage In a Home Purchased With a VA Loan

So you found an amazing home, applied for a VA loan, got approved, and bought the home of your dreams. A few months later, as you’re going about your business, you notice a defect or damage to the home that wasn’t caused by you or your family. Professional inspections should be quite thorough, and VA appraisals are as well, but it’s still possible that a serious construction defect or some damage to the home was missed in the inspections. In this sort of situation, what recourse does the buyer have? This actually depends upon whether the home is a “new construction” home or an “existing construction” home. A new construction home is one that was built by the buyer, while an existing construction home was built sometime in the past and the buyer simply bought it.

If it is a new construction home, then the borrower has up to a year to report the defect through the Department of Veterans Affairs. The complaint will then be addressed by the VA. Most newly-built homes have a one-year warranty or something similar in order to protect the buyer from those kinds of defects, and it is the warranty that the VA will work with in order to resolve the issue on behalf of the buyer. These warranties have typically expired in the case of existing construction homes, which makes them a little more difficult to work with in some cases. But even where the builder’s warranty has expired, the VA will still go to bat for you if you file a complaint.

Because existing construction homes have different purchasing terms which often absolve the sellers of any responsibility for damages to the home discovered after purchase, the VA sometimes does not have much recourse in the event of a complaint. However, filing a complaint is still a very smart decision because it could be a situation where the VA will end up covering the cost of fixing the defect for you. When the VA receives a complaint, it is evaluated whether the damage would have existed before or after the VA appraisal. It is also evaluated whether the damage should have been discovered in the official appraisal, based on the rules and guidelines the VA has for their appraisals.

The principal concern for the VA is whether the damage or defect being complained about is something that the appraiser should have caught but didn’t. In most scenarios, this is the only case where the VA can really do anything about it. For that reason, when you file a complaint with the VA there are two questions they try to answer: did the defect or damage occur before the VA appraisal, and should the appraiser have seen the defect or damage had the appraisal been done according to code? In reality, this system also protects the VA from fraudulent, frivolous, and recent damage to the home.

If the VA determines that the answer to both questions above are ‘yes’, there are two actions the VA must take, and one they might. They might take “administrative action” against the appraiser who missed the defect, but they must send a report to Loan Management and a response to the buyer with an update on the status of the complaint. In their report to Loan Management, they must include the loan file, copies of all the documentation related to the complaint and the results of their investigations into the appraiser who appraised the home in question, and a list of repairs necessary to get the house back up to VA minimum standards. The list of repairs is made up using all the information available at the time of sending the report, so is certainly not definitive, but is intended to give a ballpark estimate.

Once Loan Management receives the report, they will review it, and notify the veteran of the results of the review.

In cases where the damage is legitimate, but not related to something the VA would have picked up during the appraisal, there is less that they can do but there are still some actions they can take on the behalf of the borrower, so it is always a good idea to file a complaint with the VA if you notice damage in your home within a year after purchase.

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