What’s In Your VA Appraisal?
Just as critical as a veteran being approved for a VA home loan is the approval of the property. There really are two parts of a VA loan approval, one for the borrower and one for the home. If either does not qualify, the VA loan cannot be approved. Why do VA lenders require a VA appraisal and how do lenders use an appraisal?
A VA appraisal is an independent report prepared by a licensed and VA approved property appraiser. Most real estate sold today may be similar but rarely are the homes exactly the same. Even in the case of a series of two bedroom condominiums with the same floor plan can have different values based upon what someone recently paid for the property. The VA lender will base the loan amount on the value of the property reported in the appraisal report.
The VA appraisal determines the current market value of the property by comparing recent sales of similar properties in the neighborhood. If a 2,000 square foot single family home is sold for $100 per square foot then the appraiser will look for other homes of similar size who have sold within the past six to twelve months.
After the recent sales are identified, the appraiser takes pictures of the similar sales, called “comparable sales” or “comps” the sales price of the homes are compared to the subject property being appraised. The appraiser can make certain adjustments for variances between the properties. For example, if one property has a view of the mountains and the others do not, the home with the view may be valued higher. Or if one property has a high end kitchen with brand new appliances and granite countertops and the others do not, the property will have a higher value.
Once all adjustments are made, the appraiser compares the sales price of the home with the data reviewed and prepares a market value on the report. All things being equal and the property is not in a distressed situation such as poor condition or the owner is facing foreclosure, the sales price and the appraisal should be the same.