When you sell your home the chances are good that the buyer will be getting a home loan to purchase your house….and, in San Antonio, they could be getting a loan from the Veterans Administration since so many buyers in San Antonio qualify for a fabulous “zero down” loan because they are or were military.

If you are the seller you may have questions about this process.  If you are selling your home to a buyer that is getting a loan to buy your home the buyers lender will order an appraisal.  If the buyer is getting a VA loan the buyers lender will throw their ring in the pool of VA appraisers and a VA loan approved appraiser will randomly be chosen to do the appraisal on your home.

  1. The VA appraiser could be a great appraiser that is fair and honest and take time to do an appraisal considering size, upgrades, schools and builders.
  2. The VA appraiser could be from another city and not familiar with home builders, home values in your neighbor or schools.
  3. The VA appraiser could seem to go out of his or her way to find comparable sales that really aren’t what any Realtor, Seller or Buyer would consider “comparable”….but you are probably stuck with whatever the final value of the appraisal comes in.

Thankfully, over the last couple of years, we have only had 3 VA appraisals (out of over 100 sales)  that we felt were done by an appraiser that reflects numbers 2 and 3.

We have been told various different “stories” from these appraisers either in writing or verbally and below are a few:

  1. “Greenbelt lots don’t get an increase or adjustment” if our seller’s were on a greenbelt and “greenbelt lots do get an increase or adjustment” if the comparable properties were on a greenbelt.
  2. “We can’t use properties that were not sold in the last 90 days” and “I picked the comparable properties based on the homes that had the most in common and it doesn’t matter that other homes have sold more recently, comparable one sold within 15 days of a year ago and it will be counted without any adjustment even if the market is worth 3% or 5% more than it was last year”.
  3. “A pool is worth $15,000 whether or not it was built last year or 20 years ago, has a hot tub, is heated or was recently installed for $75,000” if our seller had a pool.
  4. “We don’t give upgrades for granite, wood floors, new roofs, new carpet, etc” if our seller had all those items and “I deducted value because your seller did not have granite counters, wood floors, a new roof, new carpet etc” if other comparable properties had those items.

What can a seller do when the appraisal comes back with a value that is less than the sales price?

  1.  You can negotiate with the buyer and seller and see if the buyer is willing to pay more for the home than the VA value.  This is money the buyer must come out of pocket with on top of any other funds owed at closing. Some VA buyers might make a lot of money….but have no savings.  Hard to believe…but because they will get a monthly retirement check many just don’t save for retirement.  Some buyers  feel like the VA appraisal, even if it would seem unfair to an unbiased third party, is the value of the home and will not pay more for it.
  2. You can put the house back on the market and sell it to a buyer that has cash or is getting FHA financing or Conventional financing since the VA appraised value will stay with the home for 6 months after the appraisal.  In a great market (like we have today) this would appear to be the thing to do.  But keep in mind, by the time the VA appraisal is back in the lenders file, the house has been off the market for 30 to 45 days….some sellers have made arrangements to move and are overwhelmed with the idea of “starting over”.
  3. Your seller can reduce the sales price to the appraisal price.

Our first one (in many years) to come in low came in just $3,000 below sales price.  At $207,000 versus $210,000.  No credit given to the seller for granite counters, a deck, wood floors, newer appliances or the fact that it was a one owner home that you could “eat off the floors” because it was so clean and well maintained.  The appraiser told me I could request a “Reconsideration of Value”….which meant almost 8 hours of filling out paperwork, printing comparable properties, adjusting those properties and resubmitting to the lender requesting a new value.  2 days later I was told “No”….so I wondered if the appraiser (the same appraiser who did the original appraisal  makes the final call)  just wasn’t having some fun wasting my time.  In the end, the seller and buyer agreed to “meet in the middle” with the seller accepting $1500 less than value and the buyer paying $1500 out of pocket to buy the home.

The second one was a home built by a superior builder than the other homes in the neighborhood.  It had high ceilings, rounded corners, wood floors, granite counters, was 7 years younger and was on a greenbelt.  The appraisal came in $20,000 below sales price.  The appraiser allowed me to submit a “Reconsideration of Value” which meant approximately 8 hours of my time.  That appraisal gave no credit to my sellers home for being on a greenbelt, being newer or having all the upgrades our seller had that the other homes in the neighborhood did not have.  The appraiser picked homes from another neighborhood (even though plenty of homes had sold in the neighborhood in the last 90 days, 6 months and over a years period) and the neighborhood he picked for comparable sales had been recently involved in a lawsuit with the homeowners successfully suing the builder because their foundations were failing….something that the out of town appraiser did not know.  Our sellers were young with very little equity and the buyers were young with zero money.  The VA buyer paid for a home inspection, pest inspection and an appraisal….adding up to approximately $1,000.  We put the home back on the market and sold to an FHA buyer (the VA appraisal sticks with the house for 6 months) for an even higher sales price than the VA buyer and closed in less than 4 weeks from the date we put the house back on the market. The new sale put $22,000 more dollars in our sellers pocket than the VA appraisal.  I always wonder….how was that fair to our Veteran?  How could 2 appraisals be so different?  Maybe because the appraiser lives in another city and isn’t familiar with values in San Antonio or neighborhoods?

Our latest appraisal fiasco was a horrible one.  Beautiful corner lot with pool, spa, 5 bedrooms, 3 and a half baths and a downstairs master.  List price $350,000.  We knew it was larger than the tax office measurements so we had the seller pay an appraiser to measure and the measurements came in at 3724 square feet…quite a bit larger than the almost 3,000 square feet the tax office had.  The VA appraisal came in at 3429 square feet.  No debate.  Not allowed to question if his measurements were correct…..so naturally, we had a problem with value.  The appraisal came in $20,000 less than sales price.  Once again, we were asked to submit a “Reconsideration of Value”…another 8 plus hours filling out paperwork the appraiser should have done correctly from the beginning.  Once again….told “tough”.  The VA appraisal would stick to the property for 6 months.  Even though he used a “comparable” sale that was sold 2 weeks short of a year ago that sold at a higher price per square foot than our property value was given…and it was a home that most of us would say “barked” it was so beat up and in need of updating.  Good for the VA buyer….but not good for our seller.

 

What is a seller to do if the appraisal comes in using what appears to be very unfair comparable properties or adjustments?  Not sell or offer to sell to our hardworking Veterans because they want to use one of their greatest benefit, the VA loan?  I hope not….and hope that we will continue to see a small percentage of VA loan appraisals that come from the appraisers that greedily accept appraisal opportunities from areas that they are not familiar with or just seem to enjoy looking for opportunities to “kill the sale” for unknown reasons we have yet to figure out.  Having a bad day, maybe?   I don’t know….but because I am a military brat I will still fight for our Veteran and be sad when I realize that a Veteran spent sometimes over $1,000 on expenses for a home he or she didn’t get to buy because an appraiser didn’t do his or her job.  Possibly the “Reconsideration of Value” methods will be changed in the future to allow a third party appraiser to review.