VA Loans: the Appraisal Process, and What Does “Tidewater” Mean?

Dear Friends – If you have ever been involved in assisting a Veteran in purchasing a home, you may find this blog informative.  Likewise, if you are a Veteran looking to purchase a home, or Seller who is considering selling their home to a Buyer who will be utilizing VA financing, you may also find this blog informative?

VA Appraisal Process:

First of all, VA appraisal orders work differently than FHA, RD & Conventional appraisal orders.  Mortgage Lenders will order FHA, RD & Conventional Appraisals through their 3rd party AMC’s (AMC = Appraisal Management Company).  The AMC acts as a middle man in communicating information back to the appraiser on the initial order, as well as including the answering any of the underwriter’s questions, and requests for revisions or additional information.  Typically, most lender’s AMC’s will have a designated list of approved appraisers that they will use in pre-determined geographical areas.  As a result, a lender may have the same half dozen appraisers who are being assigned to their orders in the same metropolitan area, and this can be beneficial to a lender in providing consistent turnaround times on appraisals.  This is not the case with VA Appraisal orders.

With VA, each lender must request the appraisal through the Veteran Administrations online portal.  The VA then assigns an appraiser, and issues a VA Case number.  The VA appraiser assignment is based on a rotation.  It is also based on the appraiser being on the list of approved appraisers for the county in which the home is located.  VA Appraisals are supposed to be completed in 10 days of order, and I can attest from my personal experience that they typically are in most cases.  Admittedly not every VA appraiser will meet the 10 day turnaround, and as the market gets more brisk as in the spring, the turn time on a VA appraisal can definitely take longer.

VA Property Requirements:

VA does require a water test when applicable.  The VA repair requirements are similar to FHA and RD repair requirements in that safety and health hazards would need to be corrected prior to closing.  Unlike some lenders may require with conventional or FHA appraisals, VA does not require that the dwelling comprise 70% of the total value of the property.  In other words, homes that are on a large acreage parcel may acceptable if there are adequate comps used in the appraisal.

VA Processing & Closing times:

As with any loan type, all VA loan applicants are different; and therefore, so are their processing times.  There will be exceptions, but there are usually not many reasons that a pre-approved Veteran shouldn’t be able to close his or her loan within 30 days of fully executed purchase agreement.  Going further, many Realtors have been involved in VA transactions that have closed within 3 weeks, and even inside of 2 weeks when working with the right lenderr. Case in point, last year in 2016, we were able to close a VA loan  in 11 calendar days (8 business days) from initial contact with the Veteran.  Indeed a well qualified VA buyer can be as strong as a well qualified 20% down conventional buyer.

What is Tidewater?  Or the “Tidewater Initiative?”:

If the VA appraiser feels that the appraisal may fall short of the purchase price, they will contact the lender to let know that they are invoking the “Tidewater Initiative.”  The goal of the Tidwater Initiative is not only to limit the amount of appraisal rebuttals, but also to allow the parties in advance of the completion of the appraisal, a chance to provide information to the appraiser that he or she might have missed.   Here is how a typical Tidewater case works:

  1. The appraiser will invoke notice of Tidewater to the lender’s point of contact, usually the Loan Officer, or Loan Processor.
  2. The appraiser is not at liberty to discuss contents of the appraisal
  3. The Loan Officer or Loan Processor will notify the Realtors of the Tidewater Initiative notification, and request comps that will support value
  4. The Lender must enter comparable sales data, making adjustments in grid like fashion, similar to an appraisal on the ROV (VA “ROV = Revision of Value” form)
  5. The Lender must provide verification that the sales used as additional comps actually closed
  6. Pending sales may be used to support time adjustments, but they must include all contract addendums
  7. The Lender should provide a brief narrative describing the similarities or differences in pending sale and the subject property
  8. The Lender has 2 days to obtain the comps from the Realtors, enter the data into the grid, and return to the data to appraiser

In summary, the VA loan differs from other loan types by having the most favorable loan terms, and that’s as it should be – a benefit back to the Veteran for having served us.  But, the VA loan also differs in terms of having major differences in guidelines on qualifying, and the appraisal process.  It is important for a smooth VA transaction, that the Veteran gets the level of local service and experience they deserve when applying for their mortgage.

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