New Proposed VA Appraisal Law Can Help Veterans Dramatically
A new piece of legislation aims to assist VA buyers get their purchase offers more readily accepted. Although it is not common in San Diego for VA eligible borrowers to be outbid regularly, there are other parts of the country where that is the case. Misconceptions about the VA loan process, VA loan closing duration, VA non-allowable fees and the VA appraisal process are some of the catalysts that can negatively weigh in on VA buyers offers. The VA appraisal process becomes mostly to blame when it comes to sellers measuring the speed of buyer’s ability to close on time. In San Diego we are the exception to the rule, and if (or when) this new VA appraisal rule takes effect, it will likely lead to even more VA homebuyers getting their offers accepted it this hotly contested market.
In May 2022 a proposed VA appraisal law would aim to curb some of the misconceptions about the VA appraisal by simply making it easier all around. As it is, there are other mortgage loan products in the market which allow for an appraisal to be conducted via desktop, or virtually, and some appraisals are waived all together (mostly in the case of refinances where there is so much equity in the home that a physical inspection is unnecessary).
For decades the VA appraisal process has had fixed rules that only recently are beginning to show their age. In particular, the VA appraiser has up to and no more than 10 business days in order to conduct and produce the VA appraisal from the date of being ordered. During a typical 30-day escrow period, or even a shorter 21-day escrow period, this can become the wrench in the gears, at no fault of the buying or selling party. The rule is the rule, and the time allowed to complete this function cause a material impact on closing timeframes. Not to mention, any items called out by the appraiser which need to be addressed prior to funding and closing on the VA loan.
During times of historically high VA refinancing and purchasing over the last 2 years, this 10 business day window was under constant pressure as appraisers were taking in more appraisal request volume than ever. Couple that with local and regional health regulations that prevented physical presence in homes at the onset of the pandemic, and we had a perfect storm brewing against the favorability of the VA loan program. Fortunately, the table seems to have turned and these same market pressures have now become the reasons to advocate for a looser and more current method of conducting VA appraisals.
Initially this is being met very positively by the real estate and mortgage industries at large. Yet like with most things only time will tell once the law is fully vetted and signed. Here’s a quick take on how we believe this will help veterans and active duty service members in San Diego use their VA entitlement:
- The VA appraisal will be less cumbersome, and therefore able to be performed more expeditiously. This is especially the case if desktop (virtual) appraisals become an acceptable method, under certain circumstances.
- This can bring the VA’s appraisal methods current and in line with other industry standards widely adopted by banks that do not have government backing (which the VA loan does) Therefore it would seem that there’s an additional advantage for making these more favorable conditions into law.
- This law can reduce the threat of escrows falling out or cancelling. Typical purchase contacts have contingency removal periods for things like appraisal, home inspection, loan approval. Unless specified and accepted by the sellers, some of these contingencies are due to be removed sooner than the VA appraiser would be required to produce their report. This directly puts the VA buyers earnest money deposit at risk. Hopefully if signed to law, this will bring less risk to the VA buyers under contract and align the VA appraisal timeframe with standard contingency periods.
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Rates & Fees Disclosure:
‡ The payment on a $300,000 30-year fixed-rate VA loan at 3.000% with a 80% loan-to-value ratio is $1,292.01 with 0 (zero) origination points due at closing. The annual percentage rate (APR) is 3.235%. Payment does not include tax and insurance premium impounds. The actual payment amount will be greater. By refinancing your existing loan, the total finance charges may be higher over the life of the loan. Some state and county maximum loan amount restrictions may apply. Appraisal fee of $600, Processing Fee of $895, Underwriting Fee of $795 included in APR calculations with borrower paying 0 (zero) loan origination points.
‡ Based on Mortgage Heroes internal data.
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