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Recently, a Seller entered into contract with a military Buyer who wanted to purchase their house using 100% financing through the VA home loan. The transaction went along smoothly enough, along through the inspection process. Then the Buyer’s lender ordered up the appraisal.

Unfortunately, the VA sent an ‘out-of-state’ appraiser not familiar with their market who used only a 1 mile radius around the subject property for finding comparable properties to determine her valuation. As a result, the home was appraised for almost 20K less than what the Buyer and Seller had agreed upon. In addition, the Buyer had also requested for the Seller to contribute $5K towards closing costs.

Both the Selling Agent and Buyer’s Agent submitted comps within a 2 mile radius of the subject property. The Buyer clients, knowing that the house was competitively priced and would not find anything remotely close in value within their price range, also got involved in writing letters to the VA.  Even the bank that was financing the deal  agreed that the 1 mile radius imposed by the appraiser was unfair and that the appraisal should be contested.  They took the agent’s comps and sent them onto the VA in a Request for Change of Value.

After more than two weeks and numerous errors, i.e.,  paperwork lost, given to the wrong person, the parties were informed that the Request for Change had been refused.  No reason or explanation was provided.

To compound their problems, the Sellers had been waiting for the appraisal results so they could act upon a counter offer for buying another house  – a house than they would now lose because other competing offers had come in on the property.

To make matters even worst still, both Buyers and Sellers will now miss their eligibility for the Federal Tax Credits being offered which end on April 30th.

This is yet one more example of the flaws inherent within the VA appraisal process and how people’s lives are impacted negatively as a result.

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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 e-mail:  kitsapagent@gmail.com

Posted in Mortgage Bites, VA Financing | 3 Comments »

Tags: bangor subase, Bremerton WA Real Estate, Kitsap County WA real estate, va appraisals, va financing, va home loans

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

“And you will know the truth, and the truth shall set you free.”

John 8:32

Okay, so the topic of VA appraisals here in Kitsap County WA isn’t on quite the same level playing field as Biblical Truth, but the principle is still the same.

One of my marketing catch phrases is ‘providing knowledgeable empowerment’ for my clients. By that, I mean, one of my primary goals is helping to better educate my clients through my years of experience, training, and education as a real estate professional, so as a result, they are more empowered to make intelligent and prudent decisions regarding buying or selling real estate.

As an advocate for my clients, it is my responsibility to educate and inform my clients about the entire real estate transaction process, from start to finish. One of the reasons for doing so is to better prepare them for any potential pitfalls, delays, or challenges that may occur. As much as we may try to achieve a smooth and timely closing, there is always the possibility for a problem to occur that is outside of our ability to control.

Such is the case with VA appraisals.

Here in WA State, most residential real estate contracts require a formal home inspection contingency process. The Buyer contracts with a professional inspector who conducts a full complete home and pest inspection. From the results, the Buyer then petitions the Sellers to repair or remedy any issues of concern. Once the Sellers agree to the terms, the contract then moves along through the ‘Pending’ status onto closing.  Usually all that remains is for the Buyer’s loan documents to be sent to the Escrow company.

It is at this point that many people get a false sense of hope/assurance that nothing can go wrong, especially in a VA Loan transaction. One thing I always tell my clients is that nothing is a done deal until your Underwriter ‘funds’ the loan, and the County records the deed. Once those two things happen, you can let your hair down and celebrate. But until then, there is always the chance that something can go sideways, however slight.

In almost every residential real estate transaction, your lender will order up an appraisal of the property to determine that its valuation is closely aligned to the agreed contract sales price.

However, in a VA transaction, the appraiser many times does more than simply determine market valuation. They can also identify potential safety hazards, structural concerns, or other defects, and make them ‘conditions for funding.’ This means that these issues must be resolved/corrected prior to closing. Some of these items may have already been uncovered and negotiated during the inspection. Still others may be in addition to what was handled during the inspection process.

While there is no doubt some standardized procedure to conducting VA appraisals, it’s always interesting (frustrating) to note how each appraiser can vary in their findings. One appraiser will come in at value with no conditions, while another appraiser will call out a long laundry list of ‘conditions for funding.’ At times there seems to be no rhyme or reason to the process.

Unfortunately, there are times when the ‘conditions for funding’ cannot be easily resolved, and the deal falls apart. But in many instances, with both Buyers, Sellers, and agents working together, a remedy can be achieved to satisfy the appraiser’s conditions.

Just knowing that the potential for these kinds of issues exist helps to eliminate any last minute surprises, and can mentally prepare Buyers for the possibility.

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

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Tags: bangor subase, Kitsap County WA real estate, naval base kitsap, Silverdale WA Real Estate, va appraisals, va appraisers, va loan