Destroying a Perfectly Good Deal Using VA Financing
February 25th, 2010 by Rich Jacobson
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
Tags: bangor subase, deal killers, naval base kitsap, va appraisals, va appraisers, va financing, va home loans, va mortgages
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.
