What Is the VA Appraisal Waterfall?

On July 22, 2022, the U.S. Department of Veterans Affairs released Circular 26-22-13, titled “Procedures for Alternative Valuation Methods.”

In practice, this rule is known as the Appraisal Waterfall. It gives lenders and eligible VA borrowers more flexibility when traditional appraisals are delayed or difficult to complete.

Normally, VA appraisals require an in-person inspection by a VA-approved appraiser to ensure the property meets Minimum Property Requirements (MPRs) — that it’s safe, sound, and sanitary (VA Handbook, Chapter 12, Section 3).

The Appraisal Waterfall allows alternative methods — such as exterior-only or desktop appraisals — under specific conditions to help keep the loan process moving.

Source: VA Circular 26-22-13 – Procedures for Alternative Valuation Methods (July 22, 2022)

Who Qualifies for the Appraisal Waterfall

The VA limits this process to borrowers who meet at least one of the following:

  1. The veteran is making a down payment of at least 20% of the purchase price.

  2. More than seven business days have passed since the lender requested an appraisal.

  3. The appraisal case remains unassigned in the VA’s system.

If one or more of these apply, the lender may request approval from the VA to use an alternative valuation method. The intent is to prevent unnecessary closing delays — particularly in areas where appraisers are in short supply.

Each case must be approved by the VA and agreed to by the lender before proceeding.

Property and Loan Restrictions

Circular 26-22-13 places specific limits on when the Appraisal Waterfall can be used.

It is not permitted for:

  • Manufactured homes

  • Condominiums

  • Properties located on leasehold land

  • Homes under renovation or construction

The property must be a single-family residence, owner-occupied, and the veteran must own the land.

These restrictions ensure that the appraisal alternative still produces a reliable valuation consistent with VA lending standards.

Appraisal Options: Exterior-Only and Desktop-Only

Exterior-Only Appraisal

This approach allows the appraiser to inspect the outside of the property and collect additional information (such as photos, prior reports, or local data) to complete the valuation.

Sometimes, the appraiser may “farm out” data collection tasks to other verified professionals, which may add a small fee noted in the report’s footnotes.

If the appraiser finds anything inconsistent with VA property standards, the appraisal must be issued “as-is.”

Desktop-Only Appraisal

A desktop appraisal is used when a property is inaccessible — for example, in remote or disaster-affected areas. The appraiser relies on public records, MLS data, aerial imagery, and local sources instead of an on-site visit.

In both cases, the appraiser must make an extraordinary assumption that the home meets Minimum Property Requirements unless clear evidence suggests otherwise.

Reference: VA Handbook, Chapter 12 – Appraisal Process and Minimum Property Requirements.

Case-by-Case Use and VA Involvement

Using the Appraisal Waterfall is not automatic. It’s evaluated case-by-case and requires coordination between:

  • The lender,

  • The loan officer, and

  • The VA Regional Loan Center (RLC).

To request approval, lenders must email the VA using the address provided in the Circular. The email subject line should include:

WATERFALL – [LAPP Number] – [Loan ID Number]

This allows the VA assignment center to track and route the request quickly.

The Circular remains active until it’s replaced or rescinded by a future update.

Key Takeaways

  • Circular 26-22-13 introduced the VA Appraisal Waterfall on July 22, 2022.

  • It provides alternative valuation methods when full appraisals are delayed or impossible.

  • Borrowers may qualify if they’re putting 20% down, waited seven days, or the case is unassigned.

  • Applies only to single-family, owner-occupied homes — not condos or manufactured housing.

  • Requires VA approval on a case-by-case basis before use.

Where to Get Trusted Help

If you’re a veteran or VA loan professional navigating appraisal issues, talk to a Vetted VA representative. They stay current on all Circulars and policy updates to ensure every veteran receives accurate, fair treatment in the lending process.

Visit Vetted VA to connect with verified professionals.