Three little words can make or break a VA appraisal. The minimum property requirements dictate conditions all homes must meet to pass the VA appraisal. If you’re familiar with the three “S’s” that guide the VA’s MPRs, you’re on track for a successful VA purchase. The three S’s create a foundation for protecting Veterans ensuring each home purchased with a VA loan are:
- Structurally Sound
VA appraisers review each home to be financed with a VA loan with the MPRs in mind. Homes that don’t meet the criteria of “safe, structurally sound and sanitary” must be repaired before a VA loan can move through escrow. How does a VA appraiser make those determinations? Read on.
Homes purchased with VA loans must be safe. Period. The VA appraiser will examine each part of the home for potential safety hazards, which might include the following:
- Unsafe mechanical systems
- Unstable porches or decks
- Stairways without handrails
- Decks without guardrails
- Peeling paint on a pre-1979 home (may be lead-based)
- Exposed electrical wires
- Overloaded fuse box
Structural integrity is imperative for homes purchased with VA loans. Major structural repairs can turn into costly financial burdens for new home buyers. To help service members avoid surprises, VA appraisers will cautiously evaluate a home for structural weaknesses such as:
- Crumbling or cracked foundations
- Large holes in floors, walls or ceilings
- Exposed exterior wood
- Dry rot
- Roof leaks or damage (roofs generally need to have at least five viable years remaining)
- Wet basements or crawl spaces
- Defective gutters or downspouts
- Poor ventilation
- Poor lot drainage
A home also needs to meet basic sanitation guidelines to garner final VA loan approval. Sanitary issues that may make a purchase “subject to” repair might include the following:
- Unsafe method of sewage disposal
- Termite or pest infestation
- Unsafe water supply; if water supply comes from a well it will have to pass a well water test.
What if a Problem is Discovered?
First off, don’t panic. An appraisal repair isn’t a death sentence for your deal. Start by evaluating the type of repair ordered and consult with your buyer’s loan officer.
Is it a quick fix? Then ask the seller to complete the repair. With luck, the deficiency will be addressed and the purchase back on track.
If you have time-consuming or expensive repairs ahead, outline the options for your buyer. Are the problems too overwhelming to deal with? Are the sellers refusing to complete the needed repairs? Is their gut telling them to get back on the house hunt? A home with major problems may never be repaired to your buyer’s (or the VA’s) satisfaction. In that case, it’s time to start searching for another home.
As an agent you can help prevent some of the heartbreak that comes from a buyer falling in love with a home and then finding out it’s too far gone in the eyes of a VA appraisal. Understand the VA’s minimum property requirements and explain any foreseeable issues as you guide your VA buyer through a home tour. By doing so you allow your buyer to make an educated decision on whether they want to pursue the purchase.
If your buyer is set on a home that you know won’t be considered move-in ready or meet the VA’s appraisal guidelines off the bat, discuss the issues you’ve identified early on in the process. Negotiate with sellers from the beginning to have repairs made and schedule a closing date that will accommodate such repairs.