Requesting a Reconsideration of Value for a VA Loan Appraisal

Marcus Marion, CMA™ 3 weeks ago 0 10

In a previous article, we explored some of the things a home buyer with a VA loan can do if the appraisal comes in below the purchase price. One of those options involved what’s known as the Reconsideration of Value, or ROV.

This guide explains what a Reconsideration of Value is, how it can affect your VA loan approval, and the steps necessary to pursue the ROV option.

VA Loan Home Appraisals

If you use a VA loan to buy a house, the property will have to be appraised by a VA-approved home appraiser. The purpose is twofold: (1) to determine the value of the home and (2) to ensure it meets the minimum property standards for a VA loan.

Sometimes, the appraisal will come in lower than the purchase price the buyer has agreed to pay. This is commonly referred to as an appraisal gap. This occurs when the appraiser determines that the house is worth less than the mutually agreed-upon purchase price.

If you find yourself in this situation when buying a home, you have several options to consider. According to the official VA loan home buyer’s guide, issued by the Department of Veterans Affairs, you could pursue the following options:

  • Request a Reconsideration of Value (ROV).
  • Renegotiate the sale price to reflect the appraisal.
  • Bring cash to the closing table to cover the difference.
  • Use the VA loan “Escape Clause” to exit the deal without penalty.
  • Request a “cost-approach” appraisal on new construction.

For the rest of this guide, we will focus on the first option presented above, the Reconsideration of Value for a VA loan home appraisal. Through this process, home buyers (and their lenders) can challenge the home appraisal and provide supporting data.

The Reconsideration of Value (ROV) Process

Here’s how the Department of Veterans Affairs explains the Reconsideration of Value that can be used during a VA loan purchase transaction:

“If you feel that the appraised value is less than it should be, ask your lender or real estate agent to provide valid sales data to your lender to support your opinion. VA staff will review the appraisal report, the additional data that was provided, and market data available in the VA Appraisal Management Service.”

If they agree that the home should have been appraised at a higher value, the loan process could move forward. On the other hand, if the VA decides that the original appraisal is accurate, the home buyer might have to pursue one of the other options outlined above.

We should clarify here that home buyers do not request an ROV directly from the Department of Veterans Affairs. Instead, a borrower using a VA loan must work with their mortgage lender to submit such a request (assuming the lender agrees that it’s justified).

The process can vary based on the circumstances, but it usually works like this:

  1. Review the Appraisal Report: The buyer obtains a copy of the appraisal report or the Notice of Value (NOV) and reviews it for errors, omissions, or under-valued aspects of the property.
  2. Gather Supporting Evidence: The buyer collects data to support a higher valuation, if possible. This might include recent sales of comparable homes in the area, documentation of significant upgrades or renovations, evidence of appraiser error (e.g., incorrect square footage, outdated comps).
  3. Contact the Lender: The buyer expresses concerns about the appraisal’s accuracy to their lender and presents the supporting evidence. Note: the buyer cannot directly request an ROV from the VA.
  4. Lender Initiates ROV: The lender reviews the buyer’s concerns and evidence. If they decide it has merit, they’ll initiate the ROV process. The VA also requires a “narrative outlining the perceived shortcomings of the VA appraisal along with an explanation for regarding the reason(s) the information provided in the report is incorrect.”
  5. SAR Review: For VA loans, a Staff Appraisal Reviewer (SAR) may examine the original appraisal, the revised information, and the appraiser’s response to determine if a new appraisal is warranted.

After all of this, the appraiser will either adjust the original value that was offered based on the new information, or maintain the original valuation.

Making a Realistic Purchase Offer

As you can see, this is a somewhat complex process with an uncertain outcome. So the best-case scenario is to avoid it entirely.

Home buyers who use VA loans can reduce the chance of a low appraisal situation by making a realistic offer based on recent and comparable sales data. With this approach, you’re performing some due diligence up front, to make an offer that reflects current market conditions.

This kind of homework could help you avoid an appraisal gap altogether, which would also eliminate the need for a Reconsideration of Value on a VA loan.

Real estate agents specialize in this kind of market research. So consider working with an experienced agent who understands the VA home loan process and knows how to make a smart offer backed by data.

You can also do some of this research on your own, thanks to the Internet. You can use property listing websites like Realtor.com and Trulia to view recent sale prices in the area where you plan to buy. This will help you make a smart offer based on comparable sales.

In conclusion: Home buyers using VA loans can pursue a Reconsideration of Value if they feel that a low appraisal is unwarranted. The borrower must work through their mortgage lender to initiate the process, ideally providing some supporting information. But the ideal scenario is to avoid this process entirely by making a realistic offer.

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