Deciphering the VA Lender’s Handbook Chapter 11 Part 2
As a buyer you will probably be interested in reading the VA appraisal – especially if the appraised value is different from the sale value. Being able to read the appraisal is a handy skill if you’re trying to find grounds for contesting the appraisal. If the appraised value comes back equal to the sale value, there isn’t much reason for the buyer to study the appraisal, but whether you’ve gotten an appraised value different from the sale value or you’re just wanting to be prepared, this article will get you started on reading and understanding the VA appraisal.
There are a few items that are required to be included in the appraisal. First, what is called the ‘appraisal report’. This will most likely be a Uniform Residential Appraisal Report (URAR). It may also be a Manufactured Home Appraisal Report, or a Small Residential Income Property Appraisal Report. The MHAP is only for manufactured homes and the SRIPAR is only for multi-unit dwellings, which is why the URAR is the most likely. Alongside the Appraisal report will be a location map, building perimeter sketches, photographs, and an itemized list of any repairs that the appraiser noticed and needs to be completed. At the forefront is likely to be an appraisal invoice.
The appraisal invoice may or may not be included in the copy you receive, since someone (probably you) will have already paid for it. In a lot of cases, the itemized list is not present because there are no repairs that need to be fulfilled in order for the home to meet the Minimum Property Requirements. Photographs are usually taken of things that serve as justification for the appraised value of the home or things that the appraiser wants to remember when sitting at his/her desk later. For example, a large, luxurious master bath in a small home would likely warrant a picture, or a kitchen that hasn’t been updated in 15 years in a $1 million house would definitely warrant one. Depending on the appraiser, the entire house might be documented thoroughly in the pictures. The intent of the perimeter sketches is to show the footprint of all the improvements on the home as well as the floor plan layout of the residential spaces. This is where you’ll find the square foot size on the improvements. A location map is from a much higher level and shows where the property is located in a neighborhood or city. The appraisal report will be a lot of checkboxes and fields that the appraiser fills out with specific information about the house. The appraisal may also include an extra item if there is more information needed to support the appraised value. Usually, however, this information will just be included on the URAR.
You may be surprised to find photos of homes that you don’t recognize included in the appraisal report – don’t panic. This is not a mistake. Appraisers are required to take a front-view photograph of similar homes in the area in order to provide context for the going rates of homes in that vicinity. These homes are usually referred to as comparables, and usually at least two comparables are provided on an appraisal. If you’re doing a proposed or under construction VA loan, or you’re purchasing a condo that’s more than three stories up, the appraisal might not include any comparables, so don’t panic if they’re missing either.
When you’re reading the URAR, or other form, the best practice for understanding it is just to slowly look over every item and look up any words you don’t understand. It takes time, but it’s the best way to make sure you’re understanding the appraisal. It can also be helpful to schedule a time with your real estate agent or lender to have them talk you through the appraisal, since they are likely to already know what all the terms mean and they can help you understand it better. There may be additional things included in the appraisal depending on what state you live in. If you see other things in the appraisal that aren’t apparent as to what they are, check with your agent or lender.