Deciphering the VA Lender’s Handbook Chapter 10 Part 9
In the last few articles, we’ve mentioned “construction exhibits” a few times. For many people, the definition of a construction exhibit is somewhat foggy. Thankfully, the VA Lender’s Handbook has a large amount of information on these, and we’ll be providing all the information that a borrower might want to know from the Construction Exhibits section of the Handbook. Construction exhibits are required for any properties that are being appraised as “proposed or under construction”. You will not need to worry about construction exhibits for new constructions (you are the first person to occupy the home) or existing constructions (you are not the first person to occupy the home).
A set of construction exhibits has some things that it must include. First, it needs the specifications on the home as shown on VA Form 26-1852. The builder can use a different format to provide the specifications as long as they are agreed-upon by both the builder and the veteran buyer and are detailed enough to suit the VA appraisal purposes. The construction exhibits must also include a plot plan, all exterior building elevations, the foundation or basement plan, a plan for each floor, sectional wall details, and a certification signed and dated by a qualified individual such as an engineer or architect (or builder, usually) that states that the exhibits provided meet local code and VA’s Minimum Property Requirements. The certification should read as follows: “I certify that the construction exhibits for (identification of the property by house type, lot, block, subdivision name, etc.) meet all local code requirements and are in substantial conformity with VA Minimum Property Requirements, including the energy conservation standards of the 1992 Council of American Building Officials’ Model Energy Code and the requirement for lead-free water piping.”
If the inspections during construction are going to be made by the VA, then you and/or the builder will need to have two sets of the construction exhibits handy. If HUD inspects it then only one will be needed. Where possible, the VA recommends using reduced-size plans to save on costs. If the builder is getting a master appraisal done, they must also provide a plan that shows the locations of all the units or lots that are to be included in the appraisal, and a Building Program Statement, which includes information on what costs will be assumed by the purchaser. As a borrower, you should have access to the appraisal information, and you will know if it was a master appraisal or an individual appraisal. As far as information you need to be aware of goes, aside from whether the property passed the appraisal, you should also pay attention to the appraised value of the property, and any part of the construction exhibit that outlines an obligation for buyers of the properties.
If you are in an area with geological or soil instability and you are building your own home, then you need to make sure the builder provides a certification that any special geological hazard has been compensated for in the design of the home. Alternatively, evidence from a qualified geologist has no special geological danger or that the special danger has been rectified can be provided instead. To be qualified, a geologist must be State licensed or a member of a national or state organization that has sufficient experience, education, and ability in engineering geology. The VA has additional requirements if HUD is going to be performing the inspections during construction.
All the construction exhibits mentioned above, along with a certification that the exhibits submitted to HUD are identical to the ones submitted to the VA, a copy of the final HUD inspection signed by the HUD inspector, and documentation that shows that any incomplete work has been completed according to HUD requirements. If the house needs to be re-inspected, the veteran buyer cannot be charged the cost of it. In cases where there may be a difference in HUD interpretation of the VA’s Minimum Property Requirements, the VA field station has the option of imposing a VA inspection to go alongside the HUD inspections. Generally, the VA prefers to err on the side of caution.