Curse of the VA Appraisal – Just in time for Halloween!
October 29th, 2009 by Rich Jacobson
It’s like a bad dream, a horrible nightmare, or worse, another mindless installment of ‘Saw’ or ‘Friday the 13th!’
Another one of my transactions has fallen prey to the ‘Curse of the VA Appraisal!’….
What began as a seemingly normal and relatively smooth contract between my Sellers (a beautiful ranch-style home on acreage in Lofall/Poulsbo WA) and some wonderful Buyers, has suddenly spiraled into the deepest, darkest recesses of VA hell – a place where common sense, fairness, and consistency cease to exist, and the massive wheels of government bureaucracy inch along painfully slow, impervious to any outside reason or influence.
I’ve been down this road before, unfortunately. Such is the risky Russian roulette of VA financing. It’s a Luck of the Draw, a crap shoot. It’s Forest Gump’s Box of Chocolates – “Ya never know what yer gonna get!”
You have enough VA transactions and you just figure your number will eventually get called up.
Whenever I take on a new listing, I usually talk to the Sellers about offering the property for purchase to VA Buyers. In our market (Kitsap County WA) you run the risk of missing out on a large segment of potential Buyers if you don’t offer it for VA financing. However, there are certain times when it’s not advisable to market a given home to VA Buyers.
With my last listing, it was a no brainer. The home was fairly new – built in 2000. It had been well-maintained, and the new 35-yr. composition roof was only a year old. The only questionable feature was the rear deck. It didn’t have any railings or handrails. But based on my previous experience with similar situations, the VA Appraisers always used the WA State Building Codes to determine an acceptable height limit before railing needed to be installed. If the deck was more than 30 inches above the ground, then the deck was required to have railings around the perimeter and handrails on each side of the steps. The highest point of my Sellers deck from ground level was 24 inches, so I figured the deck would pass the VA appraisal.
The VA appraisal was conducted, we came in at value and with NO conditions! Yippee! Hooray!
Or so we thought!….
A few days before we are scheduled to close, the Buyers Lender calls and says that the VA Regional Office in Denver has reviewed the appraisal, and based on pictures of the deck, has determined that it’s a safety/health hazard, and is requiring railings and handrails to be installed prior to closing. The VA Appraiser was asked to amend the appraisal and specify the railings as a condition for financing.
Somewhere in a big office building in Denver, a VA bureaucrat is attempting to justify their salary and decides to conjure up some mystical number of 18 inches. Where did this number come from? Do they have a dartboard in the break-room? Do they yell over to the person in the adjoining cubicle and say “Pick a number between one and 30?” No ones knows. We’re the frickin’ VA, dammit! You want the loan? Then install the railing, period!
Never-mind that the Buyers would much rather install the railings themselves, after the sale goes through. They have a particular style/design they want to use to make it their own.
Never-mind that my Sellers are going to install the very minimum required to pass, and it will most likely be removed by the Buyers once they occupy the house.
So there’s my scary story for this Halloween season. Maybe for Christmas, Santa will bring me a nice smooth VA transaction?…
UPDATE: Just as an update. I received this email today from the Buyer’s Lender, re-stating VA’s position on this issue:
“Yes, I spoke to our underwriting manager and she said since the SAR (staff appraisal reviewer) ruled that the deck needed a rail in order to be in compliance with VA guidelines regarding Safe, Sound, and Sanitary conditions. I also spoke to the VA office in Denver and the gentleman I spoke with gave me pretty much the same answer. (except not so kind) I also asked both parties if this was documented anywhere and they said the section of the handbook addressing the Safe, Sound and Sanitary conditions would cover this issue.“
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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, ActiveRain, and Crabbing in the Hood, or e-mail: kitsapagent@gmail.com
Tags: Kitsap County WA real estate, va appraisals, va appraisers, va buyers, va financing, va loans
Oh yes, and we’ve filed a formal complaint. This particular appraiser is well-known in the area, by both real estate professionals and local bankers, for undervaluing properties. I don’t know what his motivation is, but there have been several formal complaints against him. My question is, with so many complaints, why is he still an approved VA appraiser?
Luckily we are able to secure a conventional mortgage, but what happens to those who aren’t in as good a financial situation? It’s disgusting that those for whom this “benefit” is supposed to help are rarely able to use it. Letters to editors and legislators will be forthcoming. Not that that will do a lot of good.
Simply disgraceful!
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Gini: I definitely feel your pain and empathize with your warranted frustrations. There are a lot of aspects of VA financing that make little or no sense. They certainly don’t seek to provide the kind of meaningful benefits our honored Vets so rightly deserve. Have you or your lender attempted to make contact with someone at the regional VA office? They only way things will ever change is if enough people complain about a specific issue. Please let me know if there is anything I can do to be of help to you!
I am in the middle of my own VA financing nightmare. My husband’s mother is at an age where we think it’s best that she move in with us. She’s still quite independent, however, so we looked for and found a lovely brick home with a gorgeous finished walkout basement with a small kitchen. The main floor is about 1900 square feet and the basement is about the same square footage.
So we negotiated a good price and began the VA financing process. Everything went very well until the VA appraiser’s report came out. He valued the home at more than $60,000 less than our sales price (which is already $55,000 less than asking, and that wasn’t even unreasonable for the condition, size and quality of the home). In essence, the price we negotiated is the same as what the home was built for 10 years ago!
Come to find out, the comparables he used are all less than 1600 square feet with no walkout basement. His justification is that the VA doesn’t allow him to include basement space (even walkout finished basement) in the square footage, so it doesn’t count toward the value of the house. When the lender questioned this, he was extremely rude and said that it was in “the rules.”
I live in an area with many military retirees due to the low cost of living and moderate climate. It’s also an area where approximately 50% of the homes have walkout basements, many of them finished. So in essence, whatever home we want to purchase is going to fall under the same weirdo “rules” this appraiser quoted. Basically, we’re just S.O.L.
I’d like to know how a program that is supposed to benefit veterans can be so lacking in simple logic? If it was a dirt cellar I could understand not including it as part of the valuation, but it’s a beautifully finished area with 10′ ceilings, three walls of normal-sized windows and doors and almost 2000 square feet of living space!
We are absolutely in shock about this and we have been able to find no avenue of recourse that would allow us to get this house. It’s a ridiculous process and is a disgrace to veterans.
Melanie: Thanks for stopping by and commenting. I think consistency is what is really needed. I don’t think it’s necessarily the appraisers fault. They aren’t given a lot of guidance in the process. In this instance, the appraiser was actually required to go back and amend their appraisal. Why have them in the field in the first place if someone stuck in a cubicle in Denver is going to call the shots?
I’m so glad to hear (as a mortgage lender) that it’s not only my transactions that have this kind of thing happen. It really is too bad there’s not more accountability from the beaurocrats (VA or otherwise) so that we can have some consistency and predictability in these trying times!
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