blog image

What to do when VA Appraisal comes back low?

May 31, 20234 min read

If a VA appraisal goes rogue and reports below the expected value, don't wave the white flag just yet. We've got two strategic maneuvers in our arsenal - Operation Tidewater and Mission Reconsideration of Value (ROV). Let's strategize and maximize your buying power, soldier. Over and out.

The VA appraisal is a crucial two-pronged process, one ensuring a property meets minimum health and safety standards and one determining estimated market value. Receiving a lower-than-expected value can be frustrating, so let's discuss appealing options in depth.

VA Tidewater Policy

The VA established Tidewater to combat low appraisals by allowing appraisers to request additional comparable properties and market data supporting the contract price before finalizing the appraisal. Tidewater aims for a faster increase than an official ROV appeal, typically requiring 2-5 business days.

VA Tidewater process:

The Tidewater process is relatively simple:

  • VA appraisers notify the lender that the home's value will likely come in below the purchase price.

  • Alerting the lender of the property falling under the contract price is known as invoking the "Tidewater Initiative," or Tidewater for short, as listed in VA Circular 26-17-18.

  • The appraiser explains that the recent comparable home sales don't support the sale price.

  • The lender has two days to provide the appraiser with additional comparable home sales that support the purchase price.

  • Lenders typically turn to the buyer's real estate agent for help in finding good recent comparable sales.

  • The appraiser will take those additional comps and issue the final appraisal report.

  • If the Tidewater process doesn't lead to a sufficient increase in value, the appraiser must provide a written explanation as to why.

A Staff Appraisal Reviewer (SAR) issues a Notice of Value (NOV), the appraisal's official value for the VA. Once the value is officially determined, the formal ROV appeal process may begin if a Tidewater increase proves insufficient.

Reconsideration of Value (ROV)

The VA acknowledges appraisal mistakes are possible, so an ROV exists. Features may have been overlooked, suitable comps excluded, faulty information included, etc. Reasons for potentially increasing an appraisal through an ROV include:

  • Comps not in the initial appraisal: Submit up to three recent comparable home sales closed before the appraisal's effective date. Provide MLS printouts and summarize why better than original comps.

  • Evidence the appraisal contains errors: Have your agent review for faulty information, old sales used, comps unlike the subject property in size, age or condition. Provide a narrative on issues and evidence supporting claims.

  • A letter from the borrower requesting an increased appraised value and stating why it should be higher.

The next step is submitting your ROV request to the correct VA Regional Loan Center for review. You’ll work with your loan officer to complete this step of the process.

The final step is waiting on the VA to make a determination. If ROV fails, you still have a few options.

What if the ROV fails?

Every home purchase presents unique circumstances, but appraisals falling short of expectations can crush hopes and dreams. Fear not, solutions remain should an ROV appeal prove unsuccessful.

Request a lower asking price

Politely point out the appraisal reflects a value below the seller's hopes, suggesting their home may not command quite what they had envisioned. While not all sellers will budge, the possibility of securing a lower price on a home you adore remains worth exploring depending on your situation. Discuss negotiating strategies with your dedicated real estate professional.

Cover the difference in cash

For those able to do so, paying the difference between the appraisal and purchase price in cash is an option. While not always the most prudent or accessible path, lowering your VA funding fee by contributing at least 5% in cash may prove sensible. Each scenario is unique, so inherent risks and rewards must be weighed. We remain here to counsel you through any considerations.

Walk away without penalty

Earnest money is protected should a home fail to appraise according to VA policy. The VA Amendment to Contract allows withdrawing from a deal without financial penalty, enabling a return of your full deposit amount. Appraisals falling short simply indicate a property has not met lender standards, not that you should be out of funds for a home no longer moving forward as initially planned.

Never hesitate to contact the Financial Suit Team for guidance on next steps or questions regarding VA appraisals and policies. We are a team, here to support you through every twist and turn along the home buying journey.

VA AppraisalVA Home Loan
Back to Blog

Follow Us on Social Media

© 2023 Financial Suit LLC - All Rights Reserved.

NEXA Mortgage, LLC Houston, TX

Branch NMLS # 2106227 NMLS# 1755092

Licensed in FL, LA, OK, TX and WA

Contact Us

16225 Park Ten Pl 500 510, Houston, TX 77084, USA