On July 22, 2022, Circular 26-22-13 was introduced. The title of the new circular is Procedures for Alternative Valuation Methods, but we will refer to it as an Appraisal Waterfall.
As of right now, the VA is giving certain allowances on appraisal and inspection processes for borrowers who meet certain qualifications. The Veteran must be making a down payment of at least 20 percent of the purchase price. More than 7 business days have elapsed since the lender requested an appraisal. Or the case remains unassigned in VA’s system. The Appraisal Waterfall is applicable if one or two of these things occur. The Appraisal Waterfall provides the borrower with more options.
There are restrictions to this Circular. The restrictions are the following: the VA requires it must be on a single-family property/residency, not a manufactured home or condominium, not located on a leasehold estate, and not undergoing renovation. The home must be lived in by the family and they must own the land it is on.
Exterior and Desktop Only
The restrictions allow for an internal and external appraisal along with an elective appraisal that could be exterior or desktop-only. The main similarity between exterior-only and desktop-only is both appraisal options are going to be available for properties that are harder to get to. Specifically the desktop appraisal is for properties that are impossible to get to. The appraiser is assigned to sub out some details that they would normally collect on-site inspection. They collect data from other sources then they will make an extraordinary assumption that all minimum property or requirements are met.
If something in their discovery shows differently, the VA appointed appraiser will issue an As-is appraisal. Now with that exterior-only appraisal, additional fees may come which are included in the footnotes. This is due to the appraiser farming out some of the information on the home.
The desktop-only appraisal is for properties that are literally impossible to get to. If there is no timely appraiser, it will affect the VA loan and the borrower. As a result, a desktop-only appraisal is recommended. A licensed VA appraiser is given information about the area and will provide an appraisal without setting foot on the property.
Using either of these appraisals is only acceptable for certain borrowers for three reasons. They put 20% down or if there was a time delay of seven days after the appraisal was ordered. If no appraiser has been assigned within that seven-day period, the lender, the loan officer, and the borrower can get with VA and elect this appraisal waterfall process. Finally if the appraisal has not been assigned in the VA system. The VA will step in and find an appraiser that’s more qualified to take over.
As a lender, there is a procedural act. An email address is listed on this specific circular to use to contact VA. Waterfall should be the subject link followed by the lap number, and the loan ID number, this allows the VA assignment center to get involved.
The Waterfall appraisal is only case-by-case. It’s not for everyone, and it’s only allowed if the VA approves. Your lender will have to allow for it as well. This Circular will stay in place until a new one replaces it.