VA Short Sales - SELLERS Stuck With Appraisals 6 Months

recently had a short sale contract on one of my listings in Mary Esther, Florida, where the seller had a VA (Veterans Administration) home loan. A VA short sale is called an "Offer in Compromise". The offer price was $120,000, which I thought was reasonable given the condition of the property. Wells Fargo, the short sale lender, ordered an appraisal. Not just any appraisal, but a VA appraisal, called a " Notice of Value" or NOV.

The seller's short sale VA appraisal came back at $135,000, much higher than the offer and fair market price, in my opinion. The buyer backed out due to other circumstances, so I did not contest the value. I informed Wells Fargo that I would not be able to sell the property at the appraised price, and asked how long they would keep that value active. They said "Six Months!" Whoa! I've got one year inventory levels in the Mary Esther FL, and the market is still declining.

It turns out that the Veterans Administration's policy that VA home loan appraisals are valid for six months extends to SHORT SALES, TOO!

Notice the VA information pamphlet above states: "Rapidly fluctuating real estate market conditions may temporarily dictate the use of a shorter validity period". Well, the VA has already formally addressed this concern for new construction master appraisals, which cover the same floorplan being built in new subdivisions by one builder. The bulletin, - was released on May 22, 2009.
"Suspension of Master Certificates of Reasonable Value".
The VA bulletin states that due to the "rapidly declining market", holding new construction master appraisals for six months is rescinded! (This was reduced last year from 12 months).

Since the VA already acknowledges holding the appraisals valid for too long may be detrimental to the veteran in new construction, is it not reasonable to assume the same with existing construction AND with short sales? Both cases harm the vet by enforcing outdated values.

I hope the VA will issue a formal suspension of the standard appraisal time period for resale purchases and short sales. If they do not, I have enough ammunition to fight the next time!


It's Wendy!

Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.

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