If you were to name the one thing that could make your dream of being a homeowner come crashing down on you, it would probably be a low appraisal value. There’s nothing worse than finding out that the home you dreamt of buying isn’t worth the amount you agreed to pay for it.
The good news is that all hope is not lost. You still have options even if the appraisal comes in lower than you thought. While most people would tell you to walk away from the sale and find a home that is worth your money, that’s not always your first thought. Luckily, you can challenge the low value on a VA appraisal.
Keep reading to see how it’s done.
Asking for a Reconsideration of Value
Appraisals are conducted by humans and humans make mistakes. The VA recognizes this, which is why they allow a reconsideration of value. There are numerous mistakes an appraiser could have made, most of which are honest mistakes. They include:
- Overlooking certain features of the subject home
- Overlooking comparable sales that might have added value to the home
- Mistaking features of the home
- Mistaking the size of the home
Again, these are all human error. The VA appraiser goes out there and does his job, but sometimes there are better comparable sales or something gets jotted down wrong regarding the subject home. The reconsideration of value is the formal process in which you request that the appraisal get reviewed.
Don’t mistake the ROV as a sure thing that you’ll get the value you need. However, it is a second chance at getting that value when your only other option is to walk away from the sale.
Including the Right Information
The key to a successful ROV isn’t just asking for it, but providing the right information. In other words, you need proof of what you say.
If you have different comparable sales you feel are a better match, provide as much information as you can on them. Obtain the information on the sale from the MLS listing. You’ll also need to provide your own opinion on why you think these comparable sales are better suited than the ones chosen by the appraiser.
If you feel as if something was incorrect in the appraisal, you’ll need to prove it. Again, providing any evidence that you can is important. But, your opinion on why the figures were wrong is important too. The more explanations you can provide, the better your chance of getting the higher value.
You’ll likely deal with your lender first when you appeal a VA appraisal. Most lenders have an appraisal reviewer on staff. He can review the documents and determine if it’s worth sending it back to the appraiser. If the reviewer doesn’t see the merit in it, he may shoot down the request right there. If, however, he does see your point, he will send it on to the appraiser for a second look.
What if the Appraised Value Doesn’t Change?
In a perfect world, the appraisal will come back the second time at the value you need for your home purchase. We don’t live in a perfect world, though. Sometimes it comes back and it’s the same value as the appraiser originally stated.
In that case, you can do one of three things. The first we talked about already – you can just walk away from the sale. If you had an appraisal contingency in the purchase contract, you’ll get your earnest money back and be able to try for another home. If you aren’t willing to walk away you have two choices:
- Negotiate a lower sales price – Ask the seller to lower the sales price to the actual value of the home. Some sellers are willing and some aren’t; there’s no way to know without trying.
- Pay the difference – If the difference between the value and the purchase price isn’t too much and you can afford it, you can pay the difference in cash. You will have to pay the full amount and in cash at the closing, though. You’ll have to prove you have the assets too by providing your bank statements to the lender.
Unfortunately, there’s no right or wrong answer that suits everyone. The right decision depends on the circumstances. Should you pay much more than the home is worth? It’s probably not the best choice. But, if a home’s value is low because of unique circumstances or the difference isn’t that large, you may be able to make up the difference and still come out ahead in the years to come.