VA home loans, like most mortgage-loan transactions involving a new purchase loan, require an appraisal. The VA appraisal process is sometimes referred to as an inspection, which often misleads homebuyers. Here’s a look at the differences between a home inspection and a VA appraisal.
What is a VA Home Inspection?
Borrower-arranged VA inspections help home buyers make fully informed choices when considering a piece of real estate and its condition.
A good home inspection involves a complete examination of the property. Home inspectors take an in-depth look at the home, including its foundation, roof, electrical systems and crawlspace.
VA Home Loan Inspection Requirements
The VA does not require a home inspection. It does not impose restrictions on home inspections either.
However, your VA loan officer may be able to recommend a good inspector who has worked with military and veteran homebuyers before.
Any home inspector should thoroughly examine your new home from the bottom up, according to the International Association of Certified Home Inspectors, which provides checklists for homebuyers and home inspectors.
Inspectors will check your attic’s condition and ventilation, and check the roof for any leaks or other problems. They should also examine your home’s heating, cooling, ventilation, plumbing and electrical systems, and look at the safety and structural integrity of each room and any stairs in the house.
Have your inspector check your fireplace’s safety and test all of the home’s built-in appliances as well. If you’re purchasing an old home, consider having your inspector test for mold, lead paint and asbestos as well.
What is the Difference Between a Home Inspection and the VA Appraisal?
A VA home loan appraisal is not the same as a home inspection. VA appraisals are a tool VA lenders use to confirm a property’s value.
A home inspection, on the other hand, helps borrowers get an idea of their property’s condition.
VA appraisals are not inspections and do not replace a borrower-initiated home inspection, which a buyer must arrange and pay for independently.
|VA Home Inspection||VA Appraisal|
|Assesses property’s condition||Identifies property’s value|
|Provides a deep look at home’s structure and functions||Confirms property meets Minimum Property Requirements (MPR’s)|
|Not mandatory for VA loan||Mandatory for VA loan|
VA Appraisal Requirements
Apart from the home inspection process, your lender will request a VA appraisal to ensure your home meets the VA’s minimum standards.
A VA appraiser will review your home’s condition to establish a fair market value for the real estate and compare that property to other similar properties on the market. The mortgage lending industry calls these similar properties “comparables”, or “comps;” they can be an important factor in your potential home’s valuation.
In addition to meeting VA loan appraisal requirements, homes must also meet other applicable state or local building codes that may be unique to your housing market.
What Happens During a VA Appraisal?
According to chapters 10 and 11 of VA Pamphlet 26-7, the lender’s handbook, VA appraisers must:
- View the interior and exterior of the subject property (except on proposed construction cases) and the exterior of each comparable.
- Select and analyze the comparables.
- Make the final value estimate.
- Sign the appraisal report as the appraiser.
Furthermore, it’s against VA requirements for an appraiser to recommend “electrical, plumbing, heating, roofing or other inspections only as a measure of liability protection.”
The idea behind this guideline is that any home conditions “that do not appear to meet” VA minimum property requirements should be repaired as a condition of the loan approval, rather than inspected.
VA appraiser should only recommend an inspection “if there is an indication of a complex problem requiring a professional opinion,” the VA lender’s handbook states. Such complex problems may include pests, site drainage, structural defects, safety concerns or code violations.
Benefits of Home Inspections
If the VA doesn’t require home inspections, is it worth it to pay for one?
Home inspections provide benefits to homebuyers that may outweigh the out-of-pocket cost. These include:
Contract Inspection Clause
Home inspections can keep you from unintentionally buying a “money pit” that’s in need of massive repairs.
Real estate contracts usually include a home inspection clause, according to the Home Buying Institute, an independent real estate advice and housing market analysis organization. Inspection contingency clauses allow buyers a certain amount of time to complete an inspection and bring any issues to the seller’s attention.
If the seller refuses to address a problem, the contingency clause allows buyers to walk away from the deal without losing their earnest money deposit.
The above contract inspection clause gives buyers tremendous negotiating power. If your home inspection uncovers a major issue, buyers can ask sellers to repair it prior to loan closing or knock the cost of repair off the sales price.
Sellers can refuse, but if they do, buyers have the right to walk away from the deal.
Learn More About Your Home
At a minimum, home inspections are educational – even if they don’t uncover any major issues in your home. Ask the home inspector if you can attend the inspection. During your walkthrough, you’ll learn more about your home and its electrical, plumbing, heating and cooling systems. Your inspector can explain how your systems function, basic troubleshooting measures and preventative maintenance techniques.
Questions to Ask Your VA Home Loan Inspector
If you decide to conduct a home inspection for your VA home loan purchase, you should ask about your inspector’s qualifications and how the inspection process.
Here are some questions you can ask to help you get the most out of your VA home loan inspection.
Questions About the Inspector’s Qualifications
- How long have you been a professional home inspector, and how many inspections have you completed? With any contractor, you should look for ways to confirm their competencies. If an inspector can’t provide a clear history or references, he or she may not have the necessary experience for your job.
- Do you typically focus on residential inspections? Some inspectors may only perform commercial inspections. Commercial and residential inspections are different; make sure your inspector specializes in residential properties.
- Are you a member of a professional association? Membership in a state or national professional home inspection association may indicate specific training and competencies. Ask to see your home inspector’s membership identification for any associations they claim membership in.
- Do you offer repairs based on inspection results? Some professional associations forbid inspector repairs as a conflict of interest. Ask your inspector up-front about their inspection-related repair policy.
Questions About the Inspection
- What do you cover in the inspection? Most states have their own home inspection requirements. These requirements outline the minimum inspectable areas for homes in your state. Make sure your inspector routinely examines these areas.
- How much time will the inspection take? Though times vary by property, most inspections take two to three hours. If the inspector says it’ll only take 30 minutes, you may not be receiving an adequate inspection.
- How much will the inspection cost? Ask about inspection costs upfront to avoid unwelcome surprises and post-service disagreements.
- Can I attend the inspection? Walking through your home with an inspector is a great educational opportunity, and allows you to provide some oversight to the process. If your inspector doesn’t allow this, consider hiring another.
- What does the inspection report include, and when will I receive the report? Most home inspectors will provide an example report if you request it. Find out what your report will cover and when you’ll be able to review it.
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