The Department of Veterans Affairs has clarified its appraisal requirements on loans secured by properties located in rural areas.
In its lender handbook, VA says that comparable sales used in appraisal reports should be located as close to the subject property as possible.
But this has left some VA lenders confused when it comes to properties
where comparable sales might not be ideally located near the subject.
So the Veterans Benefits Administration issued Circular 26-17-14 Friday to clarify VA policy.
According to the bulletin, market areas can be greatly expanded in
suburban or rural communities. As a result, suitable comparable sales might be many miles away from the subject.
“In such cases, the appraiser should specify why those comparable sales were used and how they compare/compete with the subject,” the circular states. “The appraiser should evaluate whether extended distances are normal for this market, submit a description of the market area, and determine whether the comparable sales are within the subject’s market.”
The department added that the appraiser should indicate whether any adjustments were made for locality or proximity.
In cases where there are other
recent comparable sales closer to the subject, the appraiser should discuss why they weren’t used.
In addition, providing detailed commentary about the market and the comparable sales utilized could help reduce appraisal report revisions.
The notice said the circular is rescinded on July 1, 2019.
