If the world was perfect, the appraised value of the house you’re looking to buy would exceed or at least match your purchase price and you wouldn’t need to make repairs to meet the MPR or minimum property requirements set by your VA lender. But the world isn’t perfect. Primary Residential Mortgage, Inc. notes that you would need to think about your next steps in case repairs are required or if the property’s appraised value is lower than your purchase price.
A Low Appraisal
The amount of your VA loan shouldn’t exceed the property’s appraised value, including allowable fees and costs. That means you’d be in a dilemma if the appraisal price of the house you agreed to buy for say, $250,000 only comes up to $200,000. Fortunately, you have several options when this happens to you:
- Request for an ROV or Reconsideration of Value – Not all appraisal values are perfect and the Veterans Affairs knows this, so you could ask for an ROV if you deem the appraisal price inaccurate.
- Pay for the Difference – You need to be cautious when doing this, as paying more than the house’s appraised value might be a bad idea.
- Ask the Seller to Reduce the Purchase Price – Most sellers want to close the deal fast and if this is the case for you, the seller might be willing to negotiate the price with you.
- Just Walk Away – While you won’t get back appraisal and inspection costs, you’d still get back your earnest money deposit.
Simply put, the appraisal process is among the most crucial aspects of taking out a VA loan and buying a home. You need to go over the appraisal results with your lender and real estate agent to figure out how to go about the appraisal problems should you encounter them.