What Is a VA Home Inspection and Appraisal?

What Is a VA Home Inspection and Appraisal?

A VA home inspection, within the context of a VA loan, is primarily a specific type of appraisal required by the Department of Veterans Affairs (VA). This assessment ensures a property meets certain safety, structural soundness, and sanitary standards, known as Minimum Property Requirements (MPRs). It also establishes the home’s fair market value for loan purposes, protecting both the veteran buyer and the VA’s interest in the property as collateral.

The VA Appraisal Process

The VA appraisal process begins when a lender orders the appraisal through the Department of Veterans Affairs, which then assigns a VA-approved appraiser to the property. The appraiser determines the property’s fair market value and verifies it meets the VA’s Minimum Property Requirements (MPRs).

During the appraisal, the professional evaluates the property’s condition, comparing it to recent sales of similar homes in the area to establish its market value. The appraiser then compiles a report and issues a Notice of Value (NOV), which details the appraised value and any identified issues that need to be addressed before the loan can close. The appraisal fee, which can range from $600 or more depending on location and property type, is typically paid upfront by the buyer.

Minimum Property Requirements

The Department of Veterans Affairs establishes Minimum Property Requirements (MPRs) to ensure homes financed with VA loans are safe, structurally sound, and sanitary. These requirements cover several key categories that a VA appraiser checks. Structural soundness dictates the home must have a stable foundation, a sound roof, and no significant structural damage or active infestations.

Safety concerns require working utilities such as electricity, heating, and potable water supply, along with safe sewage disposal systems. The property must be free of hazards like exposed wiring. For homes built before 1978, any chipping or peeling paint must be remediated due to potential lead-based paint hazards. Proper drainage around the foundation is also required to prevent water damage.

Resolving Appraisal Issues

If the VA appraisal identifies issues that do not meet the Minimum Property Requirements (MPRs), the loan cannot close until these deficiencies are resolved. The appraiser lists the required repairs in the Notice of Value (NOV) report. Often, the seller is responsible for making these repairs, although negotiations can lead to the buyer covering some costs, especially if the seller refuses.

Once repairs are completed, the VA appraiser must conduct a re-inspection to verify that all identified issues have been addressed. If the property still fails to meet MPRs after repairs, or if the appraised value comes in lower than the agreed-upon purchase price, the buyer has several options. These options may include negotiating a lower price with the seller, paying the difference out-of-pocket, or exercising the VA escape clause which allows them to withdraw from the contract without penalty. In some instances, a Reconsideration of Value (ROV) can be requested if there is evidence to challenge the appraisal’s findings, such as additional comparable sales data.

Distinguishing the VA Appraisal from a Home Inspection

It is important to understand that a VA appraisal is distinct from a private home inspection, and they serve different purposes in the home buying process. The VA appraisal is a mandatory assessment focused on determining the property’s fair market value and ensuring it meets the VA’s Minimum Property Requirements (MPRs) for safety, soundness, and sanitation. This appraisal primarily protects the interests of the lender and the VA by ensuring the property is adequate collateral for the loan. The appraiser’s review is not as exhaustive as a comprehensive home inspection and may not uncover all potential defects.

In contrast, a private home inspection is an optional, highly recommended, in-depth evaluation of the entire property’s condition. A home inspector examines various components, including the foundation, roof, HVAC systems, plumbing, and electrical systems, identifying major and minor issues, maintenance needs, and potential future problems. This detailed report provides the buyer with a comprehensive understanding of the home’s overall state, empowering them to make informed decisions and negotiate repairs or price adjustments with the seller. While the VA appraisal ensures basic habitability for loan approval, a separate home inspection offers a much more granular assessment for the buyer’s own protection and peace of mind.