How VA Loan Home Appraisals Work in California and Other FAQs

In California, a property appraisal is required for nearly all VA home loans. It’s an assessment of the property’s market value and overall condition, as determined by an independent appraiser.

It also happens to be one of the most confusing subjects for home buyers.

How VA Home Appraisals Work in California

Let’s start with a couple of important definitions and distinctions:

• VA loan: A mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). These loans are designed to help military service members, veterans, and surviving spouses become homeowners. They offer a number of benefits including no down payment, no mortgage insurance, and flexible qualification criteria.
• Home appraisal: A professional assessment of a property’s market value. To determine the value, the appraiser will evaluate the property’s size, condition, location, features, and recent sales of comparable homes in the area.

Most mortgage loans require an appraisal. Lenders use them to determine the “fair market value” of the property being purchased. This is the amount that a typical buyer might be willing to pay for the property, based on local market conditions.

It also helps to ensure that the property being purchased meets the minimum property requirements (MPRs) imposed by the Department of Veterans Affairs.

According to the VA’s official loan guide for home buyers:

“Once you and the seller sign a purchase agreement, your lender (not you) will request a VA-approved appraiser to provide an opinion of value of the home. … The appraisal provides an appraiser’s opinion of value of the home and whether it meets VA’s minimum property requirements.”

FAQs About VA Home Appraisals in California

The VA appraisal process tends to generate a lot of questions and confusion among home buyers. We know this, because we’ve been answering such questions for nearly 20 years.

Below, we have compiled some of the most frequently asked questions relating to VA home appraisals in California.

1. Do all VA loans require an appraisal?

All VA purchase loans require a home appraisal, for the reasons stated earlier. So, if you’re using this program to buy a house in California, the home will have to be appraised prior to closing.

Refinancing is a different story. Borrowers with an existing VA loan who want to refinance into a lower rate can usually do so without an appraisal.

2. How are VA appraisals different from regular appraisals?

With a conventional (non-government-backed) mortgage loan, the appraiser will focus on determining the home’s market value. He or she will evaluate the home’s general condition only for the purposes of estimating the value.

With a VA loan, the appraisal serves two main purposes. The appraiser will determine the value of the home being purchased, just like they would for a conventional loan. But the appraiser will also evaluate the structural soundness, safety, and functionality of the home.

The minimum property requirements for VA loans mainly focus on basic health and safety issues.

• The electrical system should function properly.
• Bedrooms should have secondary window egress in case of fires.
• The house should be free of defective lead-based paint.
• The exterior grading should allow water to drain away from the walls.
• So on and so forth…

In California, VA home appraisals are not as strict as some people think. If a property is in good overall conditional and offers a safe and habitable environment, it will likely clear the appraisal with no issues.

3. How much do VA appraisals cost in California?

On average, home appraisals typically cost somewhere between $300 and $500. In California, VA appraisals rarely exceed $600. The price can vary based on several factors, including the size of the house. An appraiser might charge more to evaluate a larger home, and vice versa.

As a home buyer, you might have to pay the VA appraisal fee upfront, when the services are performed. This is how appraisers prefer to be paid, in most cases.

4. How long does the process take, on average?

California VA home appraisals usually take around a week to complete, from start to finish. But it can be faster than that in some cases.

While the property visit itself may only take a few hours, there is a lot of additional research that goes into a VA appraisal. The appraiser must also review recent comparable sales in the area to get a feel for market prices, in order to set a value for the property.

5. How does the appraiser determine the value of the home?

VA-approved home appraisers determine the value of a particular property partly based on recent sales data.

An appraiser will evaluate the home in much the same way that a real estate agent would. He or she will look at sales prices for similar homes in the area. These are referred to as “comps,” which is short for comparable sales.

The appraiser will also make adjustments, upward or downward, based on the specific features of the house being appraised.

For example, if the subject property has a remodeled and upgraded kitchen, the appraiser might adjust it upward from the comparable sales prices. This is one example of a value-adding feature that could increase the home’s market value.

As it states in the official VA loan handbook for lenders:

“Recent sales in the same established subdivision, condominium or PUD are typically the best indicators of value. The sales should be similar to the subject property to the extent that the sales would be competing properties if they were on the market at the same time as the subject property.”

6. What does the home buyer / borrower do during the appraisal?

There really isn’t much for the buyer to do during a home appraisal. In most cases, it is the mortgage company that orders and schedules the appraisal. They do this to ensure that the home’s value supports the loan amount.

The appraiser might have to coordinate his visit with the homeowners, to gain access to the house (unless a lockbox is used). But the buyer isn’t directly involved in this process. The appraiser will determine the value of the house and report back to the mortgage company with his findings.

You might receive a copy of the appraisal report and the notice of value (NOV).

7. How is it different from an inspection?

A VA appraisal is not a home inspection. They are two different things.

• The home appraiser is primarily concerned with the market value of the property.
• An inspector is concerned with the condition of the home, as well as any items that might need to be repaired.

With that being said, VA appraisals in California do have a basic inspection component. In addition to determining what the house is worth, the appraiser must also ensure that the home meets all minimum property requirements set forth by the Department of Veterans Affairs.

The VA appraiser will evaluate the house for structural soundness, safety, and basic sanitation. But this basic evaluation does not go into as much detail as a comprehensive inspection.

As a buyer, you might want to arrange for a separate and more thorough inspection beyond what occurs during the appraisal process.

8. What if the home appraises for less than the purchase price?

Sometimes, the appraised value of the property will fall short of the agreed-upon purchase price. This can be problematic since the VA loan amount typically cannot exceed the appraised value.

Home buyers have several options in this scenario:

• Ask the seller to lower the price. If the appraisal shows that the home is worth less than the purchase price, you might be able to negotiate with the seller to lower the sales price. Most sellers want to close the deal and may be open to a modest price reduction to keep a committed buyer.
• Seek a Reconsideration of Value. Sometimes, appraisal values can be inaccurate or fail to consider essential factors. In such cases, buyers can request a Reconsideration of Value. This involves providing additional recent comparable home sales that were not used in the original appraisal, which may lead to a revised appraisal.
• Make up the difference in cash. While not the most desirable option, you can choose to pay the difference between the appraised value and the loan value in cash. But before pursuing this option, consider whether overpaying for the property is a wise investment.
• Walk away from the deal. You also have the option to walk away from the contract with your earnest money intact, thanks to the “escape clause” agreement that’s required for VA purchase loans.