Deciphering the VA Lender’s Handbook Chapter 13 Part 5
It is a common misconception that the Notice of Value (NOV) is issued by the appraiser along with the appraisal report. This is actually not true. The NOV is issued either by the VA appraisal reviewer or the Staff Appraisal Reviewer (SAR) who works for the lender. Usually, the reviewer takes the value estimate from the appraisal report after reviewing the appraisal and uses it for the NOV, but this is not always the case. In some cases, an SAR might issue a NOV at a value different from what the appraiser listed. There are some restrictions on the change the SAR is allowed to make, however, and they are designed to restrict the opportunity for abuse of this ability.
The SAR may issue a NOV that is different from the appraiser’s value estimate, but the NOV cannot be more than 5% above or below the appraiser’s. It also must be:
- clearly warranted and fully supported
- by the real estate market or
- by other valid data considered adequate and reasonable by professional appraisal standards,
- fully documented. The documentation must:
- be attached to the original appraisal report,
- include any supporting documentation from the fee appraiser or any other source, and
- include a completed sales comparison grid in appraisal report format, or similar format, when appropriate. This analyzes any additional sales data, including adjustments for all value-related differences between the subject property and the additional sales.
SARs face a strict penalty if they are caught abusing this ability. Here’s what the Handbook says, “If VA determines that the SAR’s value change was unwarranted and resulted in a VA loss due to payment of a claim under guaranty, the lender must indemnify VA to the extent that VA determines such loss was caused or increased by the increase in value.” There are also some states that have laws that would make an SAR reluctant to exercise this authority. These states’ regulatory agencies may take the position that an SAR changing the value of the property should be subject to all the State’s requirements for appraisers.
The NOV is prepared slightly differently if it is prepared by an SAR from a LAPP lender than if it was prepared by the VA staff. If it is being reviewed by an SAR, then it must be completed using the standard NOV form from the VA, on the lender’s corporate letterhead, or attached to a statement on that letterhead that references the NOV. If the NOV is being prepared by the VA staff, it will either be on the standard VA form if it is an individual property, or on VA Form 26-1843a, Master Certificate of Reasonable Value (MCRV) if it is for a group of related properties (master appraisal). Regardless of who prepares it, every NOV must include the estimated reasonable value of the property, the estimated remaining economic life of the property, and a list of any properly-related conditions and requirements necessary for VA loan guaranty.
That list can consist of a large number of things. The Handbook puts the list into a table and it takes up 11 pages. Knowing everything that’s in that table is not important or necessary for you as the borrower, so we will not include the table in any of our articles, but if you are wanting to look at the table for yourself, you can find the VA Lender’s Handbook online here. You are looking for Chapter 13, Section 13.06. The table lists each condition and requirement shown on the standard LAPP NOV in the same order they are shown on the NOV, explains when each item is applicable, explains what action is required to satisfy the condition, and references any additional information about the item in the Handbook.
In the next article we’ll cover how the Notice of Value will get to you depending on whether it is from an SAR or a VA appraisal reviewer. We’ll also discuss how long an NOV is valid for, and go into more depth on other things related to the NOV. If you have any specific questions, feel free to contact us here at Low VA Rates using our website.