Deciphering the VA Lender’s Handbook Chapter 10 Part 11
If you’re looking at buying a house, chances are the house has already been inspected at least once. You may have already had the home inspected, or another prospective buyer already had it inspected and then decided not to buy it. In cases like these, it stands to reason that you may want to use the notice-of-value from that inspection in lieu of the VA appraisal. For the most part, the VA does not allow this. There is, however, one exception to this policy. We’ll talk about that exception, and then we’ll go into the VA appraisal fees in all sorts of different scenarios and talk about what the borrower is allowed to pay for. First, the only case where a HUD value notice can be converted for VA use:
The situation must meet all of the following requirements: first, the appraiser must be a VA fee panel member and not a staff employee of the lender. Second, the property must have been appraised as an individual case (as opposed to a “master” appraisal that covers multiple properties in a development). The property must not already have a valid VA value determination and the appraisal was originally done by a HUD inspector because the buyer wasn’t intending to use VA financing at the time of the appraisal. This can happen in two ways: either the buyer changed from HUD to VA financing while under contract, or a previous buyer using HUD financing fell through. Next, the lender needs to submit a written request for conversion along with VA Form 26-1805, the HUD value notice, and the original appraisal report. Should all of the following requirements be met, the HUD value notice can be used in lieu of the VA’s value notice.
Now for VA policy on the fees for appraisals. The Handbook states the following as the VA’s official policy: “The maximum appraisal and inspection fees allowed by each VA field station is based on customary fees for similar services in that station’s jurisdiction. Regardless of the amount of the maximum fee, appraisers and inspectors must not charge veterans more than they charge other clients for similar services.” In cases where the home is being appraised for liquidation, the appraisal requester is required to pay the fee. In cases where the borrower attempts to pay the defaulted amount back after the appraisal has been obtained, the cost of the appraisal is added to what the borrower owes.
Never, at any time, can a veteran borrower be charged for any portion of a “master” appraisal. If a builder or anyone tries to charge you for the master appraisal, slap a copy of the VA Lender’s Handbook down on the table and tell ‘em to study up. A veteran borrower can be charged for inspections on properties during construction, but cannot be charged for any re-inspections that are due to the builder’s noncompliance with VA requirements, the builder’s failure to provide access to the property or have the work ready for inspection, or the inspector’s failure to arrive at the appointed time. If an appraiser must travel outside of their normal business area, they are allowed to assess an additional fee to cover the portion of travel outside their normal area. The VA is also careful to mention that travel must be by the most direct route and the billing must include a breakdown of the mileage.
If the fee appraiser reports fee payment issues, the VA can allow them to require payment in advance from a particular requester if that requester has regular issues providing payment in a reasonable time frame and the appraiser has provided written notice to the requester about the issue and its consequences and the requester does not adequately respond. The VA must provide written authority to the appraiser in order for the appraiser to be allowed to require advance payment. The VA may provide such authorization after reviewing the appraiser’s case. Generally, this won’t affect borrowers, since you don’t regularly request appraisals, but if you’re working with a lender who doesn’t have the best record with paying appraisers, you may be required to front the cash for the appraisal sooner rather than later.