A low VA appraisal doesn’t necessarily mean you lose the house you want. Many times, you’ll still close on your new home with protections such as the Tidewater Initiative, Reconsideration of Value (ROV), or smart seller negotiations. Understanding your options and acting quickly can help keep the transaction on track.
If you’re purchasing a home in the DFW area, it can be stressful and frustrating to receive a VA appraisal that is less than your offer. A low appraisal does not automatically end your home purchase.
In this blog, you’ll learn why appraisals often come in low for VA home loans, what to do to initiate Tidewater or ROV, what negotiating options you have, and when it’s time to keep going (or to walk away with a VA Escape Clause) and protect your investment.
Quick Answer
If your VA appraisal comes in below the purchase price, your lender can only finance up to the appraised value. You can negotiate with the seller, pay the difference, submit additional comparable sales through Tidewater or a Reconsideration of Value (ROV), or use the VA Escape Clause to cancel the contract without losing your earnest money.
What To Do If Your VA Appraisal Comes In Low?
- Wait for the appraisal results.
- Respond during Tidewater if initiated.
- Submit stronger comparable sales.
- Request an ROV if necessary.
- Negotiate with the seller.
- Use the VA Escape Clause if no agreement is reached.
What Does A Low VA Appraisal Mean For Your Loan, Offer, And Appraisal Gap?
A low appraisal affects the lender, buyer, and seller differently. Understanding these impacts helps you choose the best next step.
If your independent VA appraiser evaluates your home at a value lower than what you agreed to purchase it for, then your VA lender will limit your loan to no more than the lesser of the contract price or the appraised reasonable value, based on VA guarantee of your loan. If your appraisal comes back short, you’ll need to fix the appraisal gap.
- The Lender’s Limit: So your VA loan will not exceed the appraised amount.
- The Seller’s Dilemma: Either the seller reduces their price to meet the offer, or they miss out on a potentially great buyer.
- The Buyer’s Choice: With your appraisal contingency, you can either cover the gap yourself, renegotiate, or walk away.
How Is The VA Appraisal Gap Calculated?
Knowing how the appraisal gap is calculated helps you estimate how much additional cash you may need at closing. Understanding this number also makes negotiations with the seller much easier:
- Appraisal Gap = Contract Price – Appraised Value (Notice of Value)
Example: You are trying to purchase a home in Plano for $450,000. The VA appraiser issues a Notice of Value (NOV) stating the home’s market value is $430,000. In this scenario, your appraisal gap is $20,000.
The VA lender won’t lend you more than $430,000 on the home, so you’ll have to come up with a plan to pay the $20,000 appraisal gap yourself. You will not be able to roll this appraisal gap amount into the VA loan.
Expert Tip: In competitive DFW markets, buyers sometimes agree to cover a limited appraisal gap to make their offer more attractive. However, before committing additional cash, compare the appraised value with recent comparable sales and discuss your options with your Realtor and lender. Paying significantly above market value may increase your upfront costs and could affect your equity position if home prices soften.
How Is A Low Value Different From VA Minimum Property Requirement Repairs?
Many buyers assume a low appraisal means the property failed VA requirements. These are separate issues.
- Low Value: You have your mortgage in place, but the appraiser says your market research does not support your offer.
- Minimum Property Requirement (MPR) Repairs: These requirements ensure the home is structurally sound and sanitary. You’ll get your appraisal back, and they will probably need to see a few things fixed before you can close (roof, pipes, etc.)
It’s not unusual for a house to appraise for the sales price but still need $5,000 in roof repairs to satisfy the MPRs. On the flip side, it’s even possible for a home in perfect shape to create an appraisal gap when comparable sales don’t support the contract price.
What Should You Do As Soon As A VA Appraisal Looks Short?
Act quickly once the appraisal indicates the value may come in below the contract price. Getting your real estate team to coordinate keeps your transaction in the right direction.
Your lender, real estate agent, and seller each play a role once a potential appraisal gap is identified. As soon as the appraiser signals the value may come in low, your lender and real estate agent begin working together to determine whether additional comparable sales can support the contract price. Once the appraiser determines the value won’t come in at the contract price, the loan officer gets word of it.
Then, your buyer’s agent takes the lead. The buyer’s agent should immediately explain the situation and coordinate with the lender and listing agent. The listing agent should begin discussing possible pricing adjustments with the seller.
Documents That Can Strengthen Your Tidewater Response
Before the final appraisal report is produced, your buyer’s agent needs to conduct some research. This evidence needs to be collected.
- Official Closing Statements: The last of this type of property sold locally.
- Active and Pending MLS Listings: There’s data on recent pending sales and market activity that reflects local demand.
- A Detailed Upgrade List: Or papers with your most recent property upgrades (e.g., new roof, remodeled kitchen) so you can share receipts for your renovations.
- A Solid Market Analysis: A structured document to assess the home and similar houses in the area.
How Does the VA Tidewater Process Work before the Appraisal Is Finalized?
The VA Tidewater Initiative gives buyers an opportunity to submit additional comparable sales before the appraisal is finalized. If the appraiser believes the contract price is not supported by available market data, the Tidewater process allows the buyer and lender to provide additional evidence before the final report is issued.
The VA appraiser initiates Tidewater before signing off on their report. In this situation, Tidewater is invoked by the VA appraiser if comparable sales information in the local market doesn’t support your contract price.
Upon invoking Tidewater, the appraiser has exactly 2 business days (48 hours) to submit comparable sales to your VA lender and the buyer’s agent. This small window of time necessitates an experienced team.
Missing the Tidewater response window significantly reduces the opportunity to influence the final valuation.
What Should A Strong Tidewater Comp Packet Include?
For a winning Tidewater submission, your packet must convey a clear and consistent narrative with:
- Realistic Comps: Homes sold in your neighborhood or within a one-mile radius and sold within the last six months.
- Like Kind & Square Footage: Square footage matches the subject property, age matches, and number of bedrooms matches.
- Adjusted Comparable Sales: Clearly state how your comps justify a higher sales price.
- MLS Printouts: Official MLS comps from the DFW MLS.
Expert Insight: Tidewater is unique to VA loans and gives buyers an opportunity to submit additional comparable sales before the appraisal is finalized. Responding within the required timeframe can significantly improve the likelihood of supporting the contract price when strong market evidence exists.
When Should You Request a VA Reconsideration of Value After the NOV?
If the final Notice of Value (NOV) remains below the contract price, buyers may request a Reconsideration of Value (ROV). An ROV is a formal appeal that asks the lender and Staff Appraisal Reviewer (SAR) to review the appraisal using additional evidence or corrected information.
How Is An ROV Different From Tidewater?
In the tidewater process, the appraiser gives you your first opportunity to influence the report before they complete the appraisal document. An ROV is actually an appeal of the completed report.
While the appraiser will review the tidewater data, a Staff Appraisal Reviewer (SAR) with the VA lender or staff at the VA Regional Loan Center will review the ROV.
Evidence That Can Support a Successful ROV
An ROV must be supported by factual evidence rather than general disagreement with the appraisal.
- Factual Errors: Examples include inaccurate square footage, wrong number of bedrooms, or incorrect school districts. It’s called a square footage error.
- Overlooked Comps: Better comps than the appraiser considered.
- Inappropriate Comps: Proof the appraiser was working with properties outside of the comparable DFW neighborhoods or the bustling commercial roads.
What Can You Negotiate If The VA Value Stays Below The Purchase Price?
If the final appraisal remains below the contract price, several negotiation options are available. Acting quickly gives you the best chance of closing without paying the full appraisal gap.
After the Tidewater and ROV appeals, you have the following options if the VA appraisal is still low:
- The Seller Drops the Price: They’re willing to drop the sales price to the VA appraisal value.
- The Buyer Pays Cash: The buyer covers this difference by certified check or gift fund at closing. It goes towards your cash to close.
- Split the Difference: The seller halves the asking price, and you pay him in cash for the remainder.
- Offer Incentives: Seller reduces their price – and you buy their furniture or let them do a short-term leaseback.
When Should You Use The VA Escape Clause And Walk Away?
If the seller refuses to negotiate and the appraisal gap exceeds your budget a seller who won’t budge, and you don’t have the money to cover the difference. These are the times that you need to learn to secure your funds.
When you can’t get the seller to drop the price and the gap is too large for you to cover, you need to use your appraisal contingency. Your earnest money is covered with the VA Escape Clause.
If the home’s appraised value is less than the purchase price, you’ll be able to get out of the contract and receive your earnest money back from the seller promptly.
How Can A VA-Friendly DFW Realtor Reduce The Risk Of A Low Appraisal Before And After The Offer?
An experienced VA Realtor can reduce appraisal-related risks throughout the buying process by:
- Identifying potential appraisal issues before you make an offer.
- Providing strong comparable sales to the appraiser.
- Coordinating Tidewater or ROV submissions when necessary.
- Negotiating with the seller to reduce or eliminate the appraisal gap.
Ginger Varga: Your Trusted Guide for Military Relocation in the Dallas Metroplex
When you’re in the process of buying a DFW home, a low appraisal is stressful. A low appraisal does not have to end your home purchase! Ginger Varga has extensive experience helping military families navigate VA transactions throughout the Dallas-Fort Worth area.
She’ll carefully review your MLS comps ourselves, guide you through Tidewater, and negotiate with the seller to keep your cash-to-close safe and sound.
Improve your chances of VA loan approval by letting us handle your home purchase. Get in touch for your free home buying consultation!
What Happens If The VA Appraisal Comes In Low: FAQ
Does A Low VA Appraisal Affect My COE Or Future VA Loan Eligibility?
No. A low home appraisal only pertains to the one house you are seeking. It does not harm your Certificate of Eligibility (COE), nor does it prevent you from accessing other VA benefits in the future. You could buy another property here in Texas tomorrow.
Can we Request a Second VA Appraisal from a Different Appraiser?
No. You’re not allowed to request a second appraisal just because you don’t like the price the VA approved. You’ll need to show there was a gross error or noncompliance by the appraiser, and you’ll be granted an appeal for a new appraisal.
Is A VA Appraisal The Same As A Home Inspection?
No. While VA appraisals consider market value and essential safety guidelines, a certified home inspector conducts a comprehensive evaluation of your home’s interior, exterior, structure, and systems, looking for potential issues, leaks, and future repairs.
Who Receives The VA Appraisal Report And Notice Of Value?
After your VA appraiser uploads their appraisal report to the VA portal, your VA lender and their Staff Appraiser Reviewer (SAR) get first dibs. The SAR then signs off on the formal Notice of Value (NOV) and gives it to you.
Can You Correct Incorrect Square Footage, Missing Permits, Or Wrong Property Data?
Yes. If the appraisal contains incorrect square footage or any other incorrect information about the property, your buyers’ agent should submit tax records or builder plans to the lender. The SAR will work with the appraiser on fixing it.
Are New-Construction Upgrade Deposits Protected If The VA Appraisal Comes In Low?
It all depends on your builder agreement. While you have the VA Escape Clause to protect your earnest money deposit, builders typically have their own language about design center upgrades. It’s up to you to scrutinize your contract before you give up your non-refundable deposit.
Can Seller-Paid Closing Costs Still Help If The Seller Will Not Reduce The Price?
Yes. If the seller says “no” to lower the purchase price, then they are still allowed to contribute up to 4% in seller concessions. This credit helps to lower your out-of-pocket cash so you can use your own money to cover the appraisal gap.
What Happens To My Rate Lock If Tidewater Or ROV Delays Closing?
If Tidewater or an ROV delays closing, your mortgage rate lock may expire before settlement. Contact your lender as soon as possible to discuss an extension. Some lenders offer complimentary or low-cost extensions for VA loans.
Should PCS Buyers Build Extra Appraisal Time Into The Contract?
Yes. If you’re a military family on active orders, you’ll need to add another 2 to 3 weeks to the standard contract time. An appeal to the Tidewater valuation or a formal protest can delay your closing date and cause you to lose your rate lock.
Who Pays For The VA Appraisal If The Deal Falls Apart?
When you are the buyer, you usually front the VA appraiser fee. If your transaction is canceled under the VA Escape Clause, the front-end fee will not be refunded. Although the appraisal fee is generally non-refundable, your appraisal contingency means you will indeed receive all of your earnest money back.
