What Happens When a VA Appraisal Comes In Low

Will you know before a VA appraisal comes in low?

VA appraisers are required to speak up before they finalize a value below the sales price. The Lender's Handbook (opens in a new tab) says it directly:

"During the appraisal process, fee appraisers are required to notify the requester before completing the appraisal when it appears that the estimated market value will be below the sales price. The appraiser will allow 2-business days for the requester, or any parties to the transaction contacted by the requester, to submit any additional sales data that they wish to have considered."

That is the Tidewater Procedure, named for the part of Virginia where VA first piloted it. Those two business days are the Handbook's window for new sales data before the number is set.

One correction worth making. You will see 48 hours stated elsewhere, including in VA's own 2023 report to Congress (opens in a new tab). The Handbook says two business days, and the Handbook is the operative policy. Across a weekend those are very different, and a weekend is exactly when the difference matters.

What can be sent to the VA appraiser, and who sends it?

The Handbook (opens in a new tab) lists what a comparable sale submission should include: street address, sales price, date of sale, gross living area, a copy of the listing if the property was listed, and anything else that helps the appraiser decide whether the sale is usable.

It is also specific about who is in the loop. The notice goes to "the requester", which is your lender, and the response can come from "the requester, or any parties to the transaction contacted by the requester". You and I are parties to the transaction, so our data can be considered, but the Handbook routes it through the lender rather than having anyone call the appraiser.

One more line from the Handbook (opens in a new tab) sets the limit on what this process can do:

"This process is in no way to be considered as instruction to the appraiser to meet any preset value."

Sending comps is an argument, not a lever.

What are your options if the VA appraisal stays low?

There are really only two outcomes. Either the gap gets covered or the purchase ends. Covering it has three shapes.

The seller drops the price to the appraised value. They keep a buyer who is already under contract and already qualified, which is worth something to them.

You pay the difference in cash at closing. You cannot finance the gap. VA states (opens in a new tab) that "The maximum VA loan on an individual property is either the appraised value of the property or the purchase price, whichever is lower", so the difference comes from your own funds or it does not come at all. I am a licensed real estate agent, not a lender. Your loan officer owns the financing side of this and you should confirm any of it with them directly.

Or you split it, in whatever proportion the two sides agree.

If none of those work, you can walk. Under 38 CFR 36.4303(k) (opens in a new tab), VA cannot guarantee a loan on a contract priced above the appraised value and signed before you knew that value, unless the contract carries language that reads substantially like this:

"It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs."

You are not trapped. Your earnest money is not the seller's. That protection sits in the rules of the loan, not something your agent negotiated for you.

The same clause (opens in a new tab) also says you keep "the privilege and option of proceeding" anyway if you want the house at the agreed price. The choice is yours in both directions.

How do you ask VA to reconsider the value?

If you think the number is wrong, you can ask VA to look again. The requirement is short.

"After the NOV has been issued, the Veteran may request reconsideration of value in writing by contacting the RLC of jurisdiction."

VA Lender's Handbook, Chapter 10, Topic 22 (opens in a new tab)

That is the requirement. In writing, to the Regional Loan Center. On evidence, the Handbook (opens in a new tab) says:

"Providing market data in support of the request, as described in Chapter 10, Topic 8, of this Handbook, is encouraged, but not required. A market data grid is not required."

The Handbook names no form and no threshold. It encourages market data without requiring it.

On timing, VA staff review the report and any submitted data within five business days. If they order a field review, that is completed within 20 business days. If they agree an increase is appropriate, VA issues an amended Notice of Value.

A five percent cap on reconsiderations appears in older guidance. It came from VA Circular 26-20-11 (opens in a new tab), a temporary COVID-19 circular dated March 27, 2020. Two weeks later Circular 26-20-13 (opens in a new tab)rescinded it effective April 10, 2020 and set a different temporary limit. Neither is current. There is no percentage cap in the Handbook today, and the word "percent" does not appear in the chapter at all.

Note also who makes the request. The Handbook has the Veteran make it. If it goes through the lender, the lender's Staff Appraisal Reviewer is encouraged to add market data and a recommendation. The section names no real estate agent at all. I can help you assemble it. I cannot file it for you.

Is a repair requirement the same as a low appraisal?

These are two different failures with two different fixes, and the names do not make that obvious.

A low appraisal is about money. A Minimum Property Requirement failure is about the condition of the house. The authority sits at 38 CFR 36.4351 (opens in a new tab):

"No loan for the purchase or construction of residential property shall be eligible for guaranty or insurance unless such property complies or conforms with those standards of planning, construction, and general acceptability that may be applicable thereto and prescribed by the Secretary pursuant to 38 U.S.C. 3704(a) or 38 U.S.C. 3710(b)(4), or both such sections, as applicable."

In plain terms, VA will not guarantee a loan on a house that does not meet its standards, whatever the price. An MPR item generally has to be repaired, and VA can require a repair inspection. Ask your lender whether a waiver is possible for a specific item. Adding cash does not solve it. Renegotiating does not solve it.

So when a report comes back with problems, the first question is which kind of problem you have. They go in completely different directions.

What should you do first?

Read the actual report before reacting to a summary of it. Ask your lender directly whether Tidewater was run and what was submitted, because if the answer is nothing, that is worth knowing. Then decide which way you want to go, with real numbers in front of you rather than at the end of a stressful phone call.

I am a licensed real estate agent, not a lender and not an attorney. Your lender owns the appraisal process. Anything that turns on your contract is a question for an attorney. What I can do is read the report with you, tell you plainly which move I think fits, and say so if I think the number is right and the house is not worth the contract price.

If you are in this right now, send me the report and the address and I will look at it properly.