VA Loans – Transfer of Appraiser’s Reports Between Lenders

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 9

 

So you’ve been working with a lender to get a VA loan, and you got the appraisal report back and everything’s great. Then, you happen to hear of a different lender that’s willing to offer you better terms. You follow the lead and it turns out that it’s true – the new lender can really offer you better terms than the old one. What can you do? Are you allowed to abandon your current lender mid-way through the loan application process? In case of VA loans, the answer is yes. You are allowed to jump ship and go with a different lender, even if the appraisal report has already been received from the appraiser. However, as with everything else in the VA loan program, there are some guidelines and restrictions on how this can be done and what the new lender can reuse from the old lender. Since Chapter 13 of the Handbook is talking about appraisal reports, that is what we’re going to cover in this article. If you have questions about other considerations when transferring to a new lender, it’s best to ask the loan officer you would like to be your new lender.

Lenders Cooperation

The VA expects both of the lenders to cooperate when a veteran chooses to work with a new lender after the original lender has ordered and received the appraisal. For the most part, you shouldn’t have to be involved with ensuring any cooperation beyond providing contact information; they should generally be able to work everything out without too much direct involvement from you. Now, you should know that if your existing lender has issued a NOV (Notice of Value), the new lender may not be able to use it – it depends if the old lender is a member of LAPP (Lender Appraisal Processing Program) or not. If the old lender is a member of LAPP, the new lender will not be able to use their NOV. This is because a LAPP lender uses an on-staff reviewer to review the appraisal and issue a NOV. If the VA issued the NOV, then the new lender should be able to use. Conversely, if the new lender is LAPP, they are able to review the appraisal and issue an NOV as if they had ordered the appraisal.

 

In the event that an NOV has not yet been issued by the old lender, and the new lender is not a member of LAPP, then all of the appraisal documentation must be submitted to the VA and they will review the appraisal and issue an NOV to the new lender. If the VA has already submitted an NOV to the old lender, the new lender can use the same NOV without having to have it processed again. If, for whatever reason, the new lender is not able to get a copy of the original appraisal report and all addenda (which includes the pictures of the property), then the lender may contact the appraiser who performed the appraisal on the property to get another copy. Important note – the appraiser is allowed to charge a fee for this service, and you are allowed to pay for it, so it may very well show up in your closing costs or be charged to you upfront.

 

A problem that might come up is the validity period on an NOV that has already been issued. NOVs are only valid for a certain amount of time (6 months in most cases), and if you’re switching lenders after the NOV has already been issued, and are able to use the same NOV, you might end up getting uncomfortably close to the end of the validity period. This won’t usually be a problem, since your new lender will be aware of the validity period and will work to get things done in time. Worst case scenario,Veterans Approved the new lender submits a request to the VA to extend the validity period, using the fact that the lender switched mid-process as justification. Chances are the VA will approve the request. Switching lenders isn’t the only thing that might affect the length of the validity period.

 

Even if you aren’t switching lenders, there are other things that can make it difficult to close on your loan within the validity period – such as a natural disaster. In the event of a natural disaster, however, the VA office in the affected areas will send out instructions to all VA-approved lenders regarding how to handle cases where the NOV has already been issued.

 

Requesting Changes to VA Notice of Value – Everyone’s Roles

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 8

 

Requesting a change to Notice of Value (NOV) that has been issued by either the VA or the Lender’s SAR can sometimes be hard to keep track of after you submit the request. It can be difficult to keep track of who is supposed to do what. The comforting thing to remember is that most of it will happen behind the scenes and not require much involvement from you beyond the initial change request. However, there is a chance you might be involved, and it is good to get your expectations and understanding correct. This article is dedicated to making it clear to you who does what and what role each party plays in processing a change request. We’ll cover the lender, the appraiser, the VA, and the borrower.

Knowing Everyones Role

The lender can directly process a request for an amended NOV if:

  • the lender is part of LAPP (ask your lender to find out if they are)
  • the change request is not for more than 5% of the current valuation.

 

What it means for a lender to be able to directly process a request is that the information provided by the requester, discovery of additional information by the SAR, or information provided by the appraiser along with a recommendation for an increase of value can be taken into account and incorporated into an amended NOV by the lender. In cases that don’t fit the two criteria above, the only role the lender has is to submit the request to either the appraiser or the VA and make an amended NOV after receiving an authorization from the VA to do so.

 

The appraiser’s role is outlined with a little more detail in the Handbook. The appraiser can be involved with change requests for less than 5% of the valuation if their input is needed, but if the change request is for 5% or more, but less than 10%, the appraiser must be involved and will do the majority of the processing on their end. The appraiser is required to do the following:

  • record on the request the date that it was received (for VA timeliness calculation purposes)
  • review the request and any supporting documentation
  • prepare a written recommendation, with justification that would be considered adequate and reasonable by professional appraisal standards, and
  • forward the recommendation to either the
    • lender, if the lender is LAPP and the change is not for more than 5%, or
    • VA office of jurisdiction, in all other cases.

 

If the change request is justified by market data that was not available at the time of the appraisal, the appraiser may charge a reasonable fee for processing the change.

 

The VA will get involved with a change request under two circumstances: they receive a request from the lender to change an NOV (for cases where the change being requested is over 10%), or a recommendation from an appraiser regarding a change to an NOV (for cases over 5% change, and for lenders that are not part of LAPP). When the VA receives the change request, they will do the following:

  • review the material received,
  • contact the fee appraiser, if necessary, and otherwise determine if the requested change is justified, and
  • notify the lender of VA’s decision.

 

So that is a fairly thorough explanation of the roles that each party plays when taking care of a change request. As you can see, a change request may have to go from the lender to the appraiser to the VA then back to the lender before it reaches you again. Because of this, change requests can take a lot of time, which brings us to the last party’s role in all of this: the borrower.

 

Your role might be to find the market data or information that justifies a change. If you are not the party that submitted the change request, your biggest role is going to be to be patient. None of the parties involved are interested in sabotaging your attempts to purchase a new home, and they all are going to do their best based on their workload and the information provided to process the change as accurately and quickly as they can.

Knowledge Empowers You

VA Loans – Requesting Changes to the Notice of Value

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 7

 

There are occasions that, after the Notice of Value (NOV) has been issued by either the VA or the Lender’s SAR (Staff Appraisal Reviewer), the NOV might need to be changed. The VA permits a change being made to the NOV under one of two conditions. Either the change must be clearly warranted and fully supported by real estate market data or other valid information which would be considered adequate and reasonable by professional appraisal standards, or the NOV was issued in a fraudulent manner, misrepresented the value of the home, or was made through substantial VA or SAR administrative error and action is necessary to make the valuation consistent with the real estate market.

 

Any “party of interest” is allowed to request a change to an NOV. The request must be made in writing and be Read and Understand Appraisalsubmitted to the lender. If the lender is requesting the change they’ll take care of it and you will be kept in the loop on what’s happening. The important thing to remember when submitting a change request is to include whatever data or information that is leading you to believe that a change should be made. This is one of the big reasons why it can be so valuable for you to be able to read and understand appraisal reports and know what goes into a valuation. If you don’t understand what the appraiser should have used to reach a value determination, it’s pretty much impossible to compare with what the appraiser actually used. While you don’t technically have to submit any supporting information, it will greatly assist the VA in reviewing the request, since they don’t have to hunt down the possibly-obscure reason why the valuation needs to be changed.

 

Important note here – the VA does not allow a second official VA appraisal to be requested on a property that has already been issued a valid NOV. However, a non-VA appraisal can be requested to provide support (or evidence against) the VA appraisal. However, the veteran purchaser is not allowed to pay for any portion of the cost of the additional appraisal.

 

Submit change requestWhen you submit a change request to the lender, they will process it based on what the request is. If the request is for a change of more than 5%, it’s going to take longer because the lender will need to either work with the appraiser (if the change is less than 10%) or with the local VA office that has jurisdiction (if the change is more than 10% or the appraiser’s performance is in question). If the change request is for less than 5% of the current NOV, then the lender can usually process the request internally and come to a decision without the input of the appraiser or the VA. Remember, though, that requesting a change does not mean that a change will be approved. In the great majority of cases, the original valuation provided by the appraiser is a fair and accurate market value and does not need to be changed. Make sure you have supporting market data that shows why the home is actually more or less valuable before you submit a change request.

 

Sometimes, a borrower’s ire will be erroneously directed at the lender, when in fact the issue with the NOV is actually the fault of the appraiser or the VA. The appraiser plays an important role in processing change requests to NOVs, as does the VA. The lender does as well, but for any change request above 5%, the lender essentially sends it off to either the appraise or the VA for processing. Because knowing who does what can be very important for you if you submit a change request, we’re going to start the next article by discussing the appraiser’s role, the VA’s role, and the lender’s role. We’ll also discuss something that’s not clearly outlined in the Handbook – your role as the borrower – since this series of articles is intended to help borrowers understand everything they need to know about the VA loan program. If you have specific questions, give us a call or contact us via our website.

 

VA Loans – The Notice of Value Part 2

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 6

 

We’re moving on with telling you everything you need to know about the Notice of Value. If you missed Part 1 and earlier articles also covering Chapter 13, we recommend you go back and get caught up. The first thing we’re going to talk about in this article is how Notices of Value (NOVs) get distributed and when you should expect to receive a copy depending on who prepared them. The second thing we’ll talk about is how long an NOV is valid and usable. This depends upon the situation in which the NOV is issued.

Notice of Value

First, for lenders who are part of LAPP, which means they’ve been approved to process their own appraisal reviews, the review is conducted by a Staff Appraisal Reviewer (SAR). You’ll be pleased to know that the SAR is responsible to get you the borrower a copy of the NOV and the appraisal report within 5 business days of when they receive the appraisal report from the appraiser. If there is a delay beyond that length of time, there must be documented, reasonable extenuating circumstances (such as the need to obtain additional information from the appraiser). Usually, if there is a case where the SAR needs more information from the appraiser, they’ll communicate that to your loan officer and your loan officer will communicate that to you. The SAR is also responsible for getting the NOV and the complete appraisal report contents to the local VA office either the same day as they send it to the veteran or on the last day of the month along with any other NOVs issued that month.

 

For appraisals reviewed by the VA, no timeline is provided by the Handbook as to how long it might take. However, the VA does promise to send a copy of the NOV directly to the borrower to make sure you receive it. They will also send a copy to the lender, so if you think you should have gotten one by now, you can check to see if your loan officer has received one yet. Once the NOV is issued, whether by the VA or by an SAR, it will only be valid for a certain period of time. This period of time depends on what the situation is with the veteran and the home being purchased.

 

For example, in most cases the home being purchased is either “existing” or “new” construction. To fall under one of those two classifications, it means the loan is for purchasing a house that is already completely built, and the NOV was requested as part of the loan approval process. In cases of existing and new construction, the NOV is generally valid for six months, but if real estate market conditions are rapidly fluctuating, then the validity period may be shortened. If the NOV is for a home being appraised as “proposed” or “under” construction, then the NOV is actually valid for up to 12 months to take into account the amount of time it will take to finish construction on the home. Usually you won’t run into that because most lenders won’t approve construction loans.

 

If the veteran signs a purchase agreement during the NOV’s validity period, then the validity period is extended until the veteran either purchases the home or the agreement is terminated. That isn’t the only way for a validity period to be extended, though it is both the simplest and the most common. The VA may also extend the validity period when they determine that current market conditions are calm enough that the original value estimate will remain valid for longer. This determination is done only by request, and those requests should be made by the lender. The lender will submit the extension request to the local VA office that has jurisdiction over where the property is located. The VA might contact the appraiser, if appropriate, and issue an extension to the validity period if it makes sense for the period to be extended. If not, the VA will reject the request and the original time frame will still apply.

 

Generally speaking, there aren’t a lot of scenarios where you as the borrower would want or need the validity period to be extended. If you think you might, talk with your lender to see what the best course of action is.

 

VA Loans – The Notice of Value Part 1

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 5

 

It is a common misconception that the Notice of Value (NOV) is issued by the appraiser along with the appraisal report. This is actually not true. The NOV is issued either by the VA appraisal reviewer or the Staff Appraisal Reviewer (SAR) who works for the lender. Usually, the reviewer takes the value estimate from the appraisal report after reviewing the appraisal and uses it for the NOV, but this is not always the case. In some cases, an SAR might issue a NOV at a value different from what the appraiser listed. There are some restrictions on the change the SAR is allowed to make, however, and they are designed to restrict the opportunity for abuse of this ability.

Notice of Value

The SAR may issue a NOV that is different from the appraiser’s value estimate, but the NOV cannot be more than 5% above or below the appraiser’s. It also must be:

 

  • clearly warranted and fully supported

 

      • by the real estate market or
      • by other valid data considered adequate and reasonable by professional appraisal standards,

 

  • fully documented. The documentation must:

 

    • be attached to the original appraisal report,
    • include any supporting documentation from the fee appraiser or any other source, and
    • include a completed sales comparison grid in appraisal report format, or similar format, when appropriate. This analyzes any additional sales data, including adjustments for all value-related differences between the subject property and the additional sales.

 

SARs face a strict penalty if they are caught abusing this ability. Here’s what the Handbook says, “If VA determines that the SAR’s value change was unwarranted and resulted in a VA loss due to payment of a claim under guaranty, the lender must indemnify VA to the extent that VA determines such loss was caused or increased by the increase in value.” There are also some states that have laws that would make an SAR reluctant to exercise this authority. These states’ regulatory agencies may take the position that an SAR changing the value of the property should be subject to all the State’s requirements for appraisers.

 

The NOV is prepared slightly differently if it is prepared by an SAR from a LAPP lender than if it was prepared by the VA staff. If it is being reviewed by an SAR, then it must be completed using the standard NOV form from the VA, on the lender’s corporate letterhead, or attached to a statement on that letterhead that references the NOV. If the NOV is being prepared by the VA staff, it will either be on the standard VA form if it is an individual property, or on VA Form 26-1843a, Master Certificate of Reasonable Value (MCRV) if it is for a group of related properties (master appraisal). Regardless of who prepares it, every NOV must include the estimated reasonable value of the property, the estimated remaining economic life of the property, and a list of any properly-related conditions and requirements necessary for VA loan guaranty.

 

That list can consist of a large number of things. The Handbook puts the list into a table and it takes up 11 pages. Knowing everything that’s in that table is not important or necessary for you as the borrower, so we will not include the table in any of our articles, but if you are wanting to look at the table for yourself, you can find the VA Lender’s Handbook online here. You are looking for Chapter 13, Section 13.06. The table lists each condition and requirement shown on the standard LAPP NOV in the same order they are shown on the NOV, explains when each item is applicable, explains what action is required to satisfy the condition, and references any additional information about the item in the Handbook.

 

In the next article we’ll cover how the Notice of Value will get to you depending on whether it is from an SAR or a VA appraisal reviewer. We’ll also discuss how long an NOV is valid for, and go into more depth on other things related to the NOV. If you have any specific questions, feel free to contact us here at Low VA Rates using our website.

VA Mortgage Experts

The VA Loan Appraisal Review – The SAR Certification

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 4

 

SAR CertificationOnce you receive the finalized, reviewed appraisal report, you might notice an addition made to the original report which is the SAR Certification. The SAR (Staff Appraisal Reviewer) is an employee of the lender which reviews appraisals to make sure they are accurate and reasonable. Now, an SAR will only review the appraisal report if the lender is a member of the Lender Appraisal Processing Program (LAPP). Otherwise, the appraisal review will be conducted by the VA. For you as the borrower, if an SAR is reviewing the appraisal it will probably be done faster and you’ll be kept more in the loop than if the VA is reviewing it. However, to understand the SAR certification we need to understand the SAR’s role and what he or she can and cannot do.

 

SARs are not appraisers, and they do not have the authority to alter, adjust, or comment on the appraisal report itself. The SAR is not acting as a ‘cosigner’ or a ‘supervisory appraiser’, and are reviewing the appraisal simple as a matter of verifying that it is accurate. According to the Handbook, the SAR must do the following:

  • circle the fee appraiser’s market value estimate
  • sign and date any SAR comments or other documentation relative to the appraisal review and attach that material to the appraisal report, and
  • complete the SAR certification

 

In other words, any comments or concerns the SAR has, they must go on a separate document and be signed and dated accordingly. If the SAR has concerns, they go through the steps discussed in the previous article to get them resolved. Otherwise, they move on to complete their certification, which is what you might see on the final appraisal report if your lender is a LAPP lender. The certification will either be stamped on the appraisal report in the “cost approach” or “reconciliation” block, or be attached as a separate sheet. The VA has a specific certification statement that the SAR must use. It is pasted below:

 

“I reviewed this appraisal report to determine the acceptability of the property for VA Loan Guaranty purposes in light of VA minimum property requirements and the appropriateness, completeness, consistency and accuracy of the fee appraiser’s reasonable value determination.  In completing this administrative review, I’m performing a due diligence function and not acting as, or taking the responsibility of, a cosigner of the report or supervisory appraiser.  Any disagreements or comments, etc., resulting from the administrative review of this appraisal are fully explained on the attachment to this report.

This box [  ] is checked if there were none.”

 

The SAR must also sign and date the certification, along with including their LAPP ID Number. The appraisal review (and thus the SAR certification) is an important part of the appraisal process. However, don’t fall into the trap of thinking that you can work through the SAR to get an undesirable result fixed. The SAR is only allowed to consult with the appraiser on things that don’t look right; any changes must be made by the appraiser in writing. Also, the SAR is not permitted to use anything other than market data and generally-accepted methodologies to suggest those changes. When the SAR makes the certification, they are stating outright that they personally reviewed the appraisal report, concurred with the appraiser’s recommendations except as they noted in any attachments, and they determined that the appraiser used appropriate and reasonable methodologies, made consistent conclusions based on the data in the report, and complied with all applicable VA requirements.

 

Lastly, the SAR certification is a statement that the SAR, “did not exert pressure or undue influence on the appraiser to change information or to reach a predetermined value for the subject property in order to accommodate the sale price or mortgage transaction, if clarification or corrections to the appraisal report were requested.” While the SAR is more likely to keep you in the loop if things are taking longer than expected, they are very limited in what they are able to actually do if the appraisal did not come back the way you hoped. In most cases, there’s nothing wrong with the appraisal report and you may just need to start looking for another home.Looking for a VA Home

VA Loans – Resolving LAPP Appraisal Review Problems

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 3

 

Lender Approved Processing ProgramThe acronym ‘LAPP’ stands for Lender Appraisal Processing Program. If a lender has signed up and been approved for LAPP, then they can have an appraisal reviewer on staff that reviews appraisals rather than having to send appraisals to the VA for review. The appraisal reviewer on staff must be VA-authorized and is called the Staff Appraisal Reviewer (SAR). What we’re going to go over in this article is how problems that the SAR discovers in an appraisal are addressed. Why are we covering this? Because it can be extremely frustrating if your VA loan has been delayed for over a week and all your loan officer can tell you is “there were issues with the appraisal”. It’s very helpful to not only know basically what’s going on without having to ask, but also knowing the right questions to ask – you may not be able to contact the SAR directly, but you can at least ask the right questions to your loan officer and find out what the hang-up is.

 

The VA expects the lender’s SAR to make a reasonable effort to resolve any problems they find directly with the appraiser. The SAR is also the only person at the lender’s office that is authorized to contact the appraiser with issues relating to the valuation of the property. The appraiser is expected to cooperate with the SAR in addressing any concerns about the content of their report and the timeliness with which it was prepared. In most cases, the SAR just requests additional information from the appraiser on how the valuation was reached, and when the appraiser clarifies why they did what they did, the problem is solved. Any time any additional information is added, something is clarified, or a correction or revision is made, the change must be done in writing and be signed and dated. The VA takes this very seriously – if a lender fails to attach the change to the appraisal report, the VA may take administrative action against the lender.

 

Occasionally, there is an issue with the appraisal report that the SAR and the appraiser are unable to work out. In cases like these, the SAR must contact the local VA office and provide the following:

  • a written report which clearly outlines the problem(s) and the dates and results of contact with the fee appraiser, and
  • the appraisal report and/or other pertinent documentation

 

This doesn’t happen very often, but when it does, the VA will evaluate the information the SAR sends over and come to a decision. The VA will then notify all the appropriate parties (which may or may not include you) and document the incident appropriately. In some (but not all) cases, the VA staff will review the appraisal report and issue a VA Certificate of Reasonable Value. In other cases, the VA will come to a decision on the issue in dispute, then send the report back to the SAR for issuance of a Notice of Value. Any and all complaints the SAR has about the property condition or the appraiser’s performance must be referred directly to the VA.

Appraisal Values

The VA is always interested in making sure that VA loans are processed in a timely manner, and the VA appraisal is no exception to this rule. The VA requests notification from the SARs if an appraiser is not meeting timeliness expectations, and the lender is required to resolve any timeliness problems in processing related to their own personnel.

 

The last thing you should know on this topic is that the VA expects their offices to be consistent regarding conditions and requirements for the Notice of Value. VA offices should also notify LAPP lenders by posting any changes to their requirements that only apply locally because a local situation necessitates the change. VA offices being consistent is important in order to maintain a level of fairness to all the veterans who participate in the VA loan program. Consistency also helps make the process go faster as lender’s can anticipate what the VA will say and do in response to a certain situation, and the VA doesn’t have to go through a decision-making process for every question that comes up.

 

How the VA Loan Appraisal Report is Reviewed

 

Deciphering the VA Lender’s Handbook Chapter 13 Part 2

 

Did you know that after an appraiser conducts an appraisal on the home you’re looking to buy (or sell), that another person has to review that appraisal to check for inaccuracies, inconsistencies, or other problems? The appraisal reviewer may be a member of the Lender’s staff or a VA appraisal reviewer. While you will not necessarily need to conduct a review yourself, it can be valuable to be apprised of the requirements that the VA has for reviewers and the guidance the VA givesVA Home Appraisal them, because in the event that the appraisal shoots your ability to buy the home in the foot, you may seek grounds to challenge the appraisal. It’s hard to challenge it if you don’t understand it. Aside from that, however, it’s also good for you to understand as much about what’s going on behind-the-scenes as possible. Many dissatisfied customers are dissatisfied because of a misunderstanding of how decisions are reached and what goes into the process. If you get your expectations lined up correctly, they are less likely to be violated.

 

So, bearing all that in mind, the VA requires that the appraisal reviewer, whether from the lender or the VA itself, keeps up-to-date copies of the VA Lender’s Handbook and all other VA-issued directives and reference material that pertains to the VA Loan program. If the reviewer works for the lender, then they must also keep up-to-date copies of any material issued by the local VA field station. Reviewers must also clearly understand (and keep copies of) any applicable Federal statutes and VA regulations and real estate market sales data. In addition, the VA recommends any third-party publications that provide instructions for completing the appraisal report so the reviewer can see what the appraiser may have been using as a guide. In the event of any disagreements between VA materials and third-party materials, the VA materials are the trump card. The VA also recommends that the reviewer keep up-to-date on major real estate market conditions and trends.

 

The VA wants reviewers to keep up-to-date on these trends and market conditions because they need to be able to verify whether the judgement calls the appraiser made were reasonable. Since the fair value of the home being appraised is based partially on what comparable homes have sold for recently, it stands to reason that a general understanding of market conditions would be helpful in determining fair reasonable value. For example, perhaps the comparable homes were all sold around 6 months ago, but since then the market has risen dramatically. If the appraiser was aware of this but the reviewer was not, the reviewer might question the home value the appraiser settled on. The validity of the appraisal review depends a great deal on the reviewers level of knowledge on real estate market trends, particularly in the area that the home is located.

 

The appraisal review is a good thing – it is a way that the VA performs a sort of self-audit to make sure that not only licensed VA appraisers are doing their jobs correctly, but also that veteran borrowers are not the ones who are paying the price when the appraisers do not do their jobs correctly. The review also takes care of most problems that might occur before it comes to a point of needing to challenge the appraisal. Rather than have to pay for a second appraisal anytime the appraiser makes a mistake, the review catches these mistakes, accounts for them, and issues a Notice of Value that takes into account the mistakes and is a reasonable value for the home.

 

Ask your lender if they are enrolled in LAPP (Lender Appraisal Processing Program), which is what allows a lender to have an appraisal reviewer on their staff. If the appraisal reviewer is on your lender’s staff, they are more likely to be acutely aware of real estate market conditions in your area, where a VA appraisal reviewer may have knowledge of your specific area, but also may not. For example, in the town where I live, home prices are more expensive (much to my chagrin) than any of the other towns immediately to the south, even though there is only a difference of 7-8 miles.

 

VA Value Notices – Overview

Deciphering the VA Lender’s Handbook Chapter 13 Part 1

 

Chapter 13 of the VA Lender’s Handbook is dedicated to the VA’s Value Notices. These are different from the appraisal reports that we talked about in Chapter 11. A “Notice of Value” is an official VA document that states the fair and reasonable value of the property. The appraisal report contains all the information the appraiser took into consideration when making the value determination, as well as an evaluation of whether the property meets the VA’s minimum property requirements. The VA considers the Notice of Value to be a separate document from the appraisal report, and they’ve dedicated an entire chapter to these value notices. Let’s find out why.

 

The Handbook states that VA Value Notices are so important because, “Accurate value estimates based on proper appraisal reviews are essential to the viability of the VA Loan Guaranty program and have a direct effect on the interests of the Government, veterans, and lenders.” In other words, the VA could not reasonably issue a guaranty if the fair value of the home was not firmly established by a thorough appraisal and valuation. If you think about it, this makes a lot of sense; there would be a great deal of issues if the VA offered a guaranty for any amount on any home, or even if they used a more arbitrary or loose method of determining value. Annoying they may be, but appraisals are what make the VA loan program work.VA Value Estimates

 

Lenders and borrower are counseled to rely solely upon the VA’s Notice of Value that is issued by the appraisal reviewer because the appraisal report (and the fair value reflected on the appraisal report) is subject to change during the review process. The appraisal is typically reviewed by an approved appraisal reviewer that works for the lender or for the VA, and that reviewer issues the Notice of Value. That reviewer will go through five steps in issuing the Notice of Value.

  1. Confirm eligibility of property for appraisal and a VA guaranty – the reviewer must make sure that the property was indeed eligible for an appraisal and the VA loan program in the first place.
  2. Review the appraisal report – the reviewer needs to thoroughly understand how the appraiser determined the value of the property and see if there are any issues with the home that need to be resolved as a condition of guarantee.
  3. Resolve any appraisal-related problems – this is where you as the borrower might get involved if there are problems that need to be taken care of. Chances are you’ll be able to get the seller to take care of the problems since they will likely have to do with the livability or safety of the home. Otherwise, you may need to front the cash yourself.
  4. Document the appraisal review – Like with everything else in the VA loan program, the reviewer needs to leave a paper trail explaining everything he or she did in regards to the appraisal review.
  5. Distribute the Notice of Value – You may not automatically receive a Notice of Value from your lender, but you should request a copy from the lender if you do not.

 

As mentioned above, every appraisal review must be conducted by either a staff appraisal reviewer from the lender’s company, or a VA staff appraiser. This appraisal review fulfills several key objectives, as shown below:

  • confirm that the photographs accurately reflect the appraiser’s description of the subject and comparable properties
  • verify that the appraisal report is fully complete, clear and prepared according to industry-accepted appraisal techniques and VA instructions
  • determine that the appraiser’s methodology is appropriate and that the appraiser’s conclusions are consistent, sound, supportable, logical and based upon data in the appraisal report
  • determine, through use of reasonably available information, that the appraiser’s value recommendation and other conclusions are consistent with those in similar cases recently processed
  • identify all property-related conditions and requirements that must be satisfactorily resolved before the property can become the security for a VA guaranteed loan, and
  • issue a notice of value.

 

If you want to know what references the reviewer is going to look to for guidance while conducting the review, they will mostly look to Chapters 11 and 13 of the Handbook. It probably won’t be too relevant to you, but if you are wanting to challenge the appraisal report or notice of value, understanding Chapter 11 and Chapter 13 is going to be very important.

 

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