If you are getting a VA mortgage loan, you will need to get the home appraised. In this hot market, there is a possibility that the home will not appraise for the full purchase price.
What do you do in this situation? Unlike Conventional and FHA mortgage loans, the VA Mortgage allows for an appeals process if you feel that the appraisal came in too low.
Tidewater vs Reconsideration of Value
There are 2 levels of appeals that the VA offers in the appraisal process.
The first level of appeal is called Tidewater. In the Tidewater situation, the appraiser sends out a notice saying that the appraisal is not going to meet the purchase price.
At this point, the Realtors involved in the transaction are invited to send comparable homes to the appraiser to see if an acceptable value of the home can be reached.
If after Tidewater is done and the valuation is still too low, the loan officer can move the appraisal to the second level of appeal which is called Reconsideration of Value.
In a Reconsideration of Value request, the lender sends a direct appeal to the VA to request that a new valuation of the property be made.
There are some restrictions on the Reconsideration of Value requests. First of all, the Reconsideration of Value cannot be requested on a refinance transaction. It can only be done on a purchase transaction.
Secondly, there is a limit of a 7 percent increase in the valuation that can be added to the appraisal when a Reconsideration of Value is done successfully.
Most loan officers have no clue how to successfully file a Reconsideration of Value request. Luckily, since I’m experienced in VA mortgage loans and made them my specialty, I am able to accommodate these requests.
Two Different Types of Reconsideration of Value
There are 2 different kinds of appeals that can be made when a Reconsideration of Value is requested.
The first item that can be appealed is the comparable homes.
In this type of request, the loan officer consults with the Realtors in the transaction and gathers new comparable homes that can be used on the appealed appraisal. The loan officer instructs the Realtors in the transaction to support the appeal with documentation.
The second item that can be appealed is the adjustments.
In this type of appeal, the loan officer and Realtors are ok with the comparable homes used but don’t like how the appraiser analyzed the data. With an adjustment appeal, the loan officer gathers evidence from the Realtors as to why they feel the adjustments are low on the appraisal. They get things like recent sales, proof of competition in the offer, letter from the borrower, etc.
What If It Is Still Too Low?
If the appraisal is appealed and it comes in too low a second time, there is still hope.
The seller could lower the sales price to meet the appraised value.
The buyer can bring down payment funds to the table to meet the difference between the appraised value.
Or as in most cases, any compromise is reached where there is a little bit of money coming from the buyer and the seller brings the price down to a compromise amount.
I hope this post cleared up some confusion about the appeals process with VA Mortgage loans. As always, if you have any questions or concerns, please do not hesitate to reach out to me at 937-572-3713 or send me an email.