Deciphering the VA Lender’s Handbook Chapter 12 Part 6
So far in Chapter 12 we’ve covered a lot of the VA’s Minimum Property Requirements (MPRs). We started by going over the basic MPRs that all properties are evaluated on, then we covered the MPRs concerning shared facilities, shared utilities, and access to and around the property being purchased. In this article, we’re going to cover the VA’s requirements about potential hazards and defective conditions. We’ll talk about drainage, termites, and lead-based paint, as well as some of the other most common concerns that come up during appraisals – especially in older homes. If you’re purchasing a newer home, chances are you won’t have to worry about these MPRs. If you’re purchasing an older home, however, these are things that you should watch out for long before the appraisal since they can dramatically affect the livability of the property.
The VA requires that the property being appraised must be free of any hazards which might do any of the following:
- adversely affect the health and safety of the occupants
- adversely affect the structural soundness of the dwelling and other improvements to the property, or
- impair the customary use and enjoyment of the property by the occupants.
These hazards are both numerous and varied, but we’ll cover some of the most common ones, which should help you be prepared for the appraisal and give you a heads up of the type of thing that the VA will consider a problem.
The VA classifies a “defective condition” as any condition, “…which impairs the safety, sanitation, or structural soundness of the dwelling.” As mentioned in the paragraph above, such a condition presents a problem. If a dwelling has a defective condition, the property will be unacceptable for purchase with a VA loan until the condition has been taken care of and the chance of further damage has been significantly reduced. Some examples of what the VA considers a defective condition are: defective construction, poor workmanship, evidence of continuing settlement, excessive dampness, leakage, decay, and termites. Some of those problems can be so difficult to get fixed that it is simply not worth it, and nothing forces the seller to take care of those things as part of the sale.
Another thing that might disqualify the property is the site drainage. The site is required to be graded enough that water is drained positively and rapidly away from the exterior walls of the dwelling and prevents ponding of water on the site. Stagnant water is a breeding ground for a host of issues, many of which can cause significant problems to the livability of the house. Thankfully, many drainage issues are actually fairly easy and inexpensive to solve. If you have your heart set on a house that has a drainage issue, see if the seller is willing to take care of it, and even if he or she is not, it may be simple and cheap enough for you to just take care of it yourself.
Appraisers are required to look for evidence of wood-destroying insects, fungus, and dry rot, but discovering any of those may not automatically disqualify the home. The issues will most likely need to be resolved before the house can be sold, but this is not true 100% of the time. However, even if the VA appraisal is not a concern for you, evidence of any of those things should be, even if they are just in the beginning stages. If you can take care of those things early, then they won’t cause as large of issues later on.
One of the biggest issues that arise with older homes is the presence of lead-based paint. The Handbook clearly states that “Lead-based paint constitutes an immediate hazard that must be corrected…” The exception to this rule is if the level of lead in the paint is at a level below that permitted by law. Generally, though, if it’s lead-based paint, it’s going to have too much lead in it. The appraiser is required to assume that a defective paint condition (cracking, scaling, peeling, etc.) on any interior or exterior surface on a property built before 1978 involves lead-based paint. They are also required to clearly identify the location of such conditions, and recommend corrective action.
Corrective action must either be a thorough washing and wire-brushing to remove all of the cracking or peeling, then repainted with at least two coats of non-leaded paint, or the paint needs to be completely removed or covered with wallboard, plywood, or plaster.