If the appraised value of a home you are buying or refinancing with VA financing comes back lower than you anticipated, you can request a Reconsideration of Value. You must follow the strict steps that the VA requires in order for it to be valid, though.
All requests must be made in writing, whether they come from you or the lender. The letter must clearly state the reasons (and they must be valid) and they must include some type of proof of the dispute. You may only request the review one time, so make sure that it’s complete when you request it.
Asking for Different Comparable Sales
If you don’t agree with the comparable sales that the appraiser chose, you may request different comparable sales. But in order to do so, you must provide a list of the comparable sales you would like used.
The comparable sales that you choose must be better options than what the appraiser used. In other words, they must be:
- A more recent sale than the appraiser used
- A house of a closer size
- A house that is closer in distance than the houses used in the appraisal
You can include up to three comparable sales in your request. In your request, you must include why you think these comparable sales are a better choice.
Disputes on Items Other Than the Comparable Sales
If you have a reason to dispute any other aspect of the appraisal, you will need to do so in writing. You must tell the appraiser the exact area that you have an issue with and give a reason why. Any documentation that you can include will only help your case.
You can start this process with your lender if you wish. The lender usually has an appraiser on staff that can quickly review the issues and see if they are anything to contest. If the staff reviewer thinks that your dispute does have legitimacy, they will send your request on to the appraiser for a Reconsideration of Value.
What Can you do if the ROV Fails?
Keep in mind that not all Reconsideration of Value requests are approved. If your ROV doesn’t get approved, you have a couple of options.
You can negotiate the cost of the home with the seller again. You can explain the appraisal and that you can only secure 100% of the appraised value for financing. If the seller understands market value, he may concede and lower the sales price. If the seller is stuck on a specific price, though, he may refuse the lower the price. If this is the case, you can either move onto Plan B below, or walk away from the sale.
Plan B – Pay the Difference
If you have your heart set on this particular home and you know it’s a good value despite what the appraiser says, you can pay the difference between the purchase price and the appraised value in cash. You won’t be able to secure financing for that portion of the home, but if you have the cash available, you can pay it.
Keep in mind that you will enter homeownership paying more for a home than it’s worth. If you believe the home is worth more and/or will appreciate quickly, you can pay the difference. This may be doable when you have VA financing since VA loans don’t require a down payment. The difference could be your down payment, but of course, you must prove that you have the cash to pay it.
The VA Reconsideration of Value requirements are simple and nothing out of the ordinary. The VA wants to make sure that you only make the request once and that your request is a valid one. If the value does change, you may be able to secure 100% financing for the home. If the request isn’t valid, you could end up finding a different home or paying part cash for the home you want.