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Let me start off by saying I am a big fan of VA financing. It’s one of the few loan products available for active-duty service members and veterans that requires little to no money up front in order to purchase a home. My first two homes were financed with VA home loans, otherwise I would have been a renter for a very long time!

It’s just that I really dislike the whole VA appraisal process. While we have many highly qualified appraisers here in Kitsap County WA, and most of them do an admirable job at determining property valuations, the whole VA appraisal process is horribly flawed.

If you follow any of my blogs, you know I’ve written on this subject many times before:

VA Appraisals and the Luck of the Draw Death of a Dream:  VA Appraisals Re-Visited

Curse of the VA Appraisal VA (Very Arbitrary) Appraisals in Kitsap County WA

Challenging VA Appraisals and Other Urban Legends

The challenge of accurately appraising a home’s current value in today’s volatile real estate market can be a difficult task to begin with. Add to that the rather nebulous and seemingly ’subjective’ guidelines provided by the VA, and you definitely have a formula for potential frustration/stress.

With the recent sub-prime debacle, and the growing rate of short sales/foreclosures, lenders have really tightened their home loan requirements. This extremely cautious level of examination funnels down to the appraisers who are working on behalf of the Buyers and Lender to ensure that the property is worth the sales price agreed to in the purchase contract. As a result, we are beginning to experience an increasing number of appraisals that are coming in ‘under’ value, or below the mutually agreed contract sales price.

In addition to determining value, VA appraisers are also tasked with identifying any major structural defects or safety issues. Unfortunately, all too many times, the definition of what constitutes a structural defect or safety issue is somewhat vague or subjective. The VA guidelines don’t provide the appraiser with any substantive definitions as to what constitutes a safety hazard or the specific requirements that must be met in order to correct them. And to compound the problem, these items are normally called out as a ‘condition’ for funding, meaning that they must be resolved/corrected prior to closing.

I’ve endured a few transactions where so-called ‘conditions’ were imposed and they ended up killing the deal. Granted, if the roof has a big hole in it or the foundation is crumbling, such issues should be addressed and resolved prior to closing.

Unfortunately, common sense doesn’t always rule the day where VA appraisals are concerned. If a window sill has chipped paint (a purely cosmetic issue) and it’s the middle of January, wouldn’t  it make more sense to paint it later in the Spring or Summer when it isn’t raining? It doesn’t matter when it comes to VA financing. If the condition can’t be remedied before closing, the transaction won’t be funded. Period.

Decks are one of those home features that typically garners a lot of scrutiny. Is it structurally sound? Does it have adequate railings? But what if the deck is only 12 inches above ground level? Are railings necessary? The VA guidelines won’t tell you. It’s completely up to the respective appraiser and what their personal interpretation/definition of a potential safety hazard is.

As real estate professionals, we work very hard and diligently to ensure that the entire transaction goes as smoothly as possible for our clients. Unfortunately, elements like the VA appraisal are outside our ability to control. All we can do is prepare our clients for the frustrating uncertainties that may occur, and deal with them as best we can.

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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, Everyday CK, and Crabbing in the Hood, or you can e-mail him:  kitsapagent@gmail.com

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Tags: bangor subase, deal killers, naval base kitsap, va appraisals, va appraisers, va financing, va home loans, va mortgages

I experienced a ‘First‘ in my real estate career the other day.

In my 10+ years as a professional agent, an appraisal for one of my listings here in Kitsap County WA came in ‘under‘ value. In other words, an appraiser was sent out to determine if the home they were buying was worth what they had agreed to pay my Sellers. Unfortunately, the Appraiser’s NOV (Notice of Value) resulted in a rather substantial shortfall.

Did I mention that the Buyer’s are using VA financing?

Yes, that’s right, the Curse of the VA Appraisal STRIKES Again!

For those of you familiar with my articles here on SBB and over on ActiveRain, you know that I’ve written on this topic on a number of occasions, such as:

“Very Arbitrary” = VA Appraisals in Kitsap County WA

“Curse of the VA Appraisal in Kitsap Couty WA“

“Death of a Dream” – VA Appraisals Re-Visited

“VA Appraisals and The Luck of the Draw“

I feel very fortunate to have gone so long without any of the homes I’ve marketed and sold have an appraisal come back ‘under’ value. Now part of that is probably just sheer luck. But a big part of it is the pride I take in understanding and knowing our local real estate market, and pricing my listings at or near market value.

So when this particular appraisal came up short, I was surprised, to say the least. Well, shocked was more like it. No, I was really pissed!

Maybe you’re in the same boat and that’s what’s brought you to this article. You’ve come to the realization that “VA Appraisals are like a Box of Chocolates – you never know what you’re gonna get!”

What are your options as a Seller when a VA Appraiser’s Notice of Value comes in low?

1.   You can agree to lower your sales price to the lower appraised value, and move forward to closing (certainly the easiest resolve, but not always the most financially prudent).

2.   Have the Buyers make up the difference in ‘cash’ at closing, or negotiate/agree to share/split the difference (unfortunately, in a slow market (Buyer’s Market) it can be rather difficult convincing the Buyer to be generous).

3.   You can Request a Change to the NOV. Some call this a ‘Reconsideration of Valuation‘ or ‘Challenging‘ the VA Appraisal.

Personally, I don’t like using the term ‘challenging’.’ It comes off as being somewhat ‘adverserial’ in nature, and the last thing you want to do is alienate  or upset the VA Appraiser!

In the VA Pamphlet 26-7,  Chapter 13, pages 26-28, it states that the NOV can be changed if either the change is clearly warranted and fully supported by real estate market or other valid information considered adequate or reasonable by professional appraisal standards, or, the issuance of the NOV involved fraud, misrepresentation or substantial VA or lender administrative error.

Your Listing Agent should be able to help formulate any supporting documentation necessary for submitting your Request of Change. Most Listing Agents normally prepare a detailed Comparative Market Analysis for their Sellers to guide them in determining market value/listing price.

The Sellers can also elect, at their own expense, to have another professional appraiser, not assigned by VA, to conduct an additional valuation, and supply that information to the Lender for consideration.

The Request of Change to the NOV must be made in writing and should be submitted to the Buyer’s Lender. The Buyer’s Loan/Mortgage Officer should be able to provide you with a fax number or email address for the Lender so you can submit your documentation directly to them.

Once the Lender receives your Request for Change, they will normally forward it onto the VA appraiser originally assigned to the file, but only if it involves a value increase of more than 5% but less that 10%. If the Request for Change involves a value estimate of more than 10%, the Lender forwards the Request onto the VA Regional Office of Jurisdiction.

Unfortunately, there is no guarantee that the VA appraiser will amend or change their original valuation findings based on any supporting documentation you provide. In the end, their say is final, and their appraisal remains in effect for a period of 6 months. This means that if you decide to terminate the contract, and put your house back on the market, any subsequent Buyers using VA or FHA financing will be required to use the low appraisal. This can have a significant negative impact on the marketability of your home and effectively reduce the pool of potential Buyers.

All the more reason for you to build a strong, persuasive case for a value increase using solid, reasonable market data.

Have an appraisal question for VA? Click HERE and go to your respective State, where you can email your question to the VA Regional Office for your area.

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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, Crabbing in the Hood, Facebook, Twitter, or e-mail: kitsapagent@gmail.com

Posted in Real Estate Bites | 3 Comments »

Tags: Kitsap County WA real estate, va appraisals, va appraisers, va financing, va lenders

As you may have heard, the $8000 Federal Tax Credit for 1st-Time Home Buyers has been extended.

In addition, several new key elements have been included  into this legislation.

The $8000 First Time Home Buyer Tax Credit was due to expire on November 30th. In my humble opinion, this has been one of the few bills our elected officials have created that has genuinely stimulated our economy and given much needed tax relief to those who can really use it!

Here’s the full scoop on the extension and what else has been added:

1st-Time Home Buyers Credit

Many aspects of this tax credit remain the same as before:

• First Time Home Buyers will still get a tax credit of 10% of the home purchase price, up to the maximum of $8000.

• It applies to both partners of a married couple who haven’t owned a principle residence for at least 3 years prior to the purchase.

• If you claim this tax credit, you must continue to live in the home as your principle residence for 3 consecutive years.

• This credit is a ‘dollar-for-dollar’ reduction of your income tax amount and can be refundable. For example, if you qualify for the full $8000 tax credit, but only owe $6000 in taxes, you could receive a refund for $2000 from the IRS.

• If you buy your home in 2009, claim it on your 2009 tax return. If you buy your home in 2010, you can claim this tax credit on either your 2009 or 2010 tax return.

• You don’t qualify if you purchase the home from a lineal ancestor or descendant, i.e., your parents, grandparents, children, or grandchildren.

What has changed:

• you must be under contract to purchase the home no later than May 1st, 2010, and the transaction must close no later than July 1st, 2010.

• There is now a cap amount being imposed. For purchases made after November 6th, 2009, the tax credit will not be allowed for homes costing more than $800,000.

Repeat Home Buyers Tax Credit

This is a new tax credit that is now available for the rest of us who have owned homes in the past.:

• If you’ve lived in the same house for 5 consecutive years, you qualify.

• The tax credit is 10% of the purchase price, up to a maximum of $6500.

• If you buy your home in 2009, claim it on your 2009 tax return. If you buy your home in 2010, you can claim this tax credit on either your 2009 or 2010 tax return.

• You don’t qualify if you purchase the home from a lineal ancestor or descendant, i.e., your parents, grandparents, children, or grandchildren.

• This new Repeat Buyers Tax Credit only applies to home purchases made after November 6th, 2009.

An added note for Active-Duty Military:

Active-duty military members who are serving overseas on official extended duty for at least 90 days during 2009 and the first four months of 2010 have an extra year to take advantage of these credits.

For additional information on these tax credits:

Consult with the Internal Revenue Services Home page; go to the Smart Money website; and CNN Money.com

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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, Crabbing in the Hood, Facebook, Twitter, or e-mail:  kitsapagent@gmail.com

Posted in Buyers | 5 Comments »

Tags: $8000 1st time home buyers tax credit, first time homebuyers, IRS, Kitsap County WA real estate, repeat buyers tax credit

According to an article on Forbes.com, the popular $8000 Tax Credit afforded to First Time Home Buyers is very close to being extended through April of 2010.

Here is an excerpt of that article:

“An $8,000 federal tax credit for first-time homebuyers that is set to expire at the end of the month inched another step closer to getting extended until April. The Senate voted 85-2 yesterday to move the bill to a final vote, and senior members of Congress said that they expected the bill to pass next week.”

With everything else that’s been going on in Washington of late, i.e. massive debt to bailout Wall Street, dismal ‘Cash for Clunkers’ program, government take-over of Health Care, indecision on Afghanistan, etc., it’s encouraging to see progress on legislation that is truly effective for a change, and makes a difference for taxpayers and the economy.

This would be great news for many first-time home buyers here in Kitsap County WA and people who have been considering purchasing their 1st home. I have some great folks who have been extremely patient in awaiting word on their short sale contract for a home out in Lakeland Village, outside of Belfair WA. This extension would be wonderful news for them!

For more information on the $8000 Federal Housing Tax Credit for 1st-Time Home Buyers, go HERE!

If you’ve ever wondered what all is involved in buying a home, check out my fun and informative series entitled “Adventures in 1st-Time HomeBuying.”

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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

Posted in Buyers | 4 Comments »

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

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Tags: Kitsap County WA real estate, va appraisals, va appraisers, va buyers, va financing, va loans