Chapter 13: Value Notices

© VA Lenders Handbook – VA Pamphlet 26-7

In this Chapter

This chapter contains the following topics.

13.01 Reviewing Appraisal Reports
13.02 Resolving LAPP Appraisal Review Problems
13.03 Documenting LAPP Appraisal Reviews

13.04 LAPP-Issuing a NOV at Other Than the Appraiser’s Value Estimate
13.05 Preparing Notices of Value
13.06 Notice of Value Conditions and Requirements

13.07 Distributing Notices of Value
13.08 How Long Notice of Value is Valid
13.09 Requesting Changes to the NOV

13.10 Transfer of Appraiser’s Reports Between Lenders
13.11 Discovery of Title Limitations & Conditions
13.12 Effect of Major Disasters on Notices of Value
Exhibit 1—LAPP Lender’s Notice of Value

Importance of VA Value Estimate

Accurate value estimates based on proper appraisal reviews are essential to the viability of the VA Loan Guaranty program and have a direct effect on the interests of the Government, veterans and lenders.

Rely Only on Notice of Value

Since appraisal reports are subject to change upon review, lenders and holders should rely only upon a VA notice of value issued by the appraisal reviewer.

Issuing a Notice of Value

The table below describes the steps to follow when issuing a Notice of Value.

Steps	Description	Refer to
1	Confirm eligibility of property for appraisal and LAPP processing.	Chapter 10, and Section 15.09.
2	Review the appraisal report.	Section 13.01, and Chapter 11.
3	Resolve any appraisal-related problems.	Section 13.02.
4	Document the appraisal review.	Section 13.02.
5	Prepare the Notice of Value.	Section 13.04 Section 13.05 Section 13.06, and Section 12.08.
6	Distribute the Notice of Value.	Section 13.07.

Note: Every property eligible for the Lender Appraisal Processing Program (LAPP) should be processed under LAPP. If a LAPP lender fails to process an eligible property under LAPP, the request for VA guaranty must include a detailed explanation.

13.01 Reviewing Appraisal Reports

Purpose of Review

Every appraisal made for VA purposes must be reviewed either by the lender’s VA-authorized staff appraisal reviewer (SAR) under the Lender Appraisal Processing Program (LAPP), or a VA staff appraiser in order to

confirm that the photographs accurately reflect the appraiser’s description of the subject and comparable properties
verify that the appraisal report is fully complete, clear and prepared according to industry-accepted appraisal techniques and VA instructions
determine that the appraiser’s methodology is appropriate and that the appraiser’s conclusions are consistent, sound, supportable, logical and based upon data in the appraisal report
determine, through use of reasonably available information, that the appraiser’s value recommendation and other conclusions are consistent with those in similar cases recently processed
identify all property-related conditions and requirements that must be satisfactorily resolved before the property can become the security for a VA guaranteed loan, and
issue a notice of value.

Handbook References for Reviewing Appraisal Reports

The following references in this handbook provide additional information when reviewing appraisal reports.

Chapter 11
Section 13.02
Section 13.03
Section 13.04
Section 13.05
Section 13.06
Section 13.07, and
Section 13.08.

Other Reference Materials

The appraisal reviewer must maintain up-to-date

copies of this handbook and all other VA-issued directives and other reference material pertaining to the Loan Guaranty program. For LAPP lenders, this includes the material issued by VA field stations having jurisdiction over each area where the lender originates LAPP loans
applicable Federal statutes and VA regulations
“Uniform Standards of Professional Appraisal Practice,” published by The Appraisal Foundation (www.appraisalfoundation.org), and
real estate market sales data (to be used for comparative purposes).

Additional material is recommended:

Any publications providing instructions for completing the Uniform Residential Appraisal Report (URAR). In the event of a conflict between VA and private source material, however, the VA-issued material must be considered controlling.
Other current reference materials regarding major real estate market conditions and trends. This includes weekend subscriptions to major newspapers, which typically have expanded real estate sections; industry-related newsletters; publications which provide analyses and forecasts of various housing and mortgage trends and relevant statistical data.

Real Estate Market Familiarity

Although VA has no requirement that appraisal reviewers visit the geographic areas where appraised properties are located, they should keep up-to-date on major real estate market conditions and trends, in order to properly analyze the location-related information contained in appraisal reports.

13.02 Resolving LAPP Appraisal Review Problems

Contact and Cooperation

LAPP lenders are expected to take reasonable steps to resolve problems detected during their appraisal reviews. While branch office staff and authorized agents may contact the fee appraiser about the timeliness of a particular appraisal, only the lender’s VA-authorized staff appraisal reviewer (SAR) may contact the appraiser to discuss valuation matters.

VA fee appraisers are expected to cooperate in addressing concerns about the content of their appraisal reports and timeliness in completing assignments.

Additional Information

When information, methodology or conclusions in the appraisal report require additional clarification or support, the SAR must contact the fee appraiser and obtain the necessary information.

Appraisal Report Changes

Any clarification, correction or revision by a fee appraiser to an appraisal report must be in writing, signed and dated. The fee appraiser must clearly identify any revised appraisal report as such in bold letters.

The lender must attach any clarification, correction or revision to the original appraisal report provided by the fee appraiser. The withholding of this or any other appraisal documentation is unacceptable and may result in administrative action against the lender and/or fee appraiser, as appropriate.

See: Section 13.04, which addresses restrictions on changes by the SAR to the fee appraiser’s value estimate.

Referral to VA

When a substantive problem is not corrected after a reasonable effort, the SAR must send the VA office of jurisdiction

a written report which clearly outlines the problem(s) and the dates and results of contact with the fee appraiser, and
the appraisal report and/or other pertinent documentation.

VA will subsequently notify the appropriate parties of its decision and document the fee appraiser’s performance file, the lender’s file and the case file, as appropriate. It may be necessary for VA staff to review the appraisal report and issue a VA Certificate of Reasonable Value.

Note: Refer all complaints about property condition or appraiser performance to VA.

Timeliness

LAPP lenders are responsible for resolving any timeliness problems involving authorized agents and branch personnel.

SARs should notify VA when fee appraiser timeliness expectations are not being met.

VA Consistency

VA offices are expected to be as consistent as possible regarding NOV conditions and requirements. They must notify LAPP lenders by posting changes to the “approved local conditions” section of the C&V web pages when a local situation dictates an additional condition or requirement not listed on the standard NOV.

Reference: See Chapter 13, Exhibit 1, LAPP Lender’s Notice of Value.

13.03 Documenting LAPP Appraisal Reviews

SAR are not Appraisers

VA does not consider the lender’s staff appraisal reviewer (SAR) to be acting as an “appraiser” when reviewing appraisal reports, or taking on the responsibility of a “cosigner” or a “supervisory appraiser.” Except for the certification described below, the SAR should not sign, initial or make any comments or adjustments anywhere on the appraisal report.

SAR’s Responsibility

The SAR must

circle the fee appraiser's market value estimate
sign and date any SAR comments or other documentation relative to the appraisal review and attach that material to the appraisal report, and
complete the SAR certification.

SAR Certification Placement

The certification must be either

stamped on the appraisal report in the “cost approach” or “reconciliation” block in a manner which least obscures other information, or
attached as a separate sheet which also includes the VA case number and property address.

SAR Certification Wording

The certification must be signed, dated and read, “I reviewed this appraisal report to determine the acceptability of the property for VA Loan Guaranty purposes in light of VA minimum property requirements and the appropriateness, completeness, consistency and accuracy of the fee appraiser’s reasonable value determination. In completing this administrative review, I’m performing a due diligence function and not acting as, or taking the responsibility of, a cosigner of the report or supervisory appraiser. Any disagreements or comments, etc., resulting from the administrative review of this appraisal are fully explained on the attachment to this report.

This box [ ] is checked if there were none.

______________________________
Signature

______________
LAPP ID. No.

_______”
Date

Implication of SAR Certification

By making this certification and the certifications required with the application to participate in LAPP, the SAR is stating that in every case he/she

personally reviewed the appraisal report
concurred with the fee appraiser’s recommendation, except as noted in an attachment to the report
determined that the appraiser

used methodologies that were appropriate and reasonable in light of industry-accepted appraisal techniques
made conclusions that were consistent, based upon data in the report, and
complied with applicable VA requirements.

did not exert pressure or undue influence on the appraiser to change information or to reach a predetermined value for the subject property in order to accommodate the sale price or mortgage transaction, if clarification or corrections to the appraisal report were requested.

13.04 LAPP-Issuing a NOV at Other Than the Appraiser’s Value Estimate

Change Restrictions

The lender’s staff appraisal reviewer (SAR) may issue a NOV that is up to 5 percent above or below the fee appraiser’s value estimate provided the adjustment is:

clearly warranted and fully supported

by the real estate market, or
by other valid data considered adequate and reasonable by professional appraisal standards,

And

fully documented. The documentation must:

be attached to the original appraisal report,
include any supporting documentation from the fee appraiser or any other source, and
include a completed sales comparison grid in appraisal report format, or similar format, when appropriate. This analyzes any additional sales data, including adjustments for all value-related differences between the subject property and the additional sales.

Other Changes

Changes in fee appraiser repair recommendations are addressed in Section 13.06 (under “NOV Item-Repairs”)

Value increases of more than five percent or other changes requested after the notice of value is issued are addressed in Section 13.09.

Penalty for Abuse

If VA determines that the SAR’s value change was unwarranted and resulted in a VA loss due to payment of a claim under guaranty, the lender must indemnify VA to the extent that VA determines such loss was caused or increased by the increase in value.

Potential Conflict With State

SARs may not wish to exercise this authority where it is considered to be in conflict with State requirements.

In some states, the agency which regulates appraisers may take the position that any change in value by an appraisal reviewer subjects that individual to the State’s requirements for appraisers.

13.05 Preparing Notices of Value

Format Under LAPP

Under LAPP, the lender’s VA-authorized staff appraisal reviewer (SAR) must complete the standard notice of value form in TAS, or on

the lender’s corporate letterhead, or
attached to a statement on that letterhead which references it.

Reference: See Chapter 13, Exhibit 1, LAPP Lender’s Notice of Value.

Format If Prepared by VA Staff

If prepared by VA staff, the notice of value may be TAS generated or prepared on VA Form 26-1843a, Master Certificate of Reasonable Value (MCRV) for a group of related properties.

Notice of Value Contents

Every notice of value will include

estimated reasonable value of the property (See Section 11.02).
estimated remaining economic life of the property (See Section 11.10), and
a list of any property-related conditions and requirements necessary for VA loan guaranty.

Reference: See Section 13.06.

13.06 Notice of Value Conditions and Requirements

Introduction

Every notice of value (NOV) issued in conjunction with an appraisal review must include a list of any conditions and requirements that must be satisfied for the property to be eligible for VA loan guaranty.

Reference: See Section 13.05.

Table of NOV Conditions & Requirements

The Table of NOV Conditions and Requirements below

lists each condition and requirement shown on the standard LAPP NOV in the same order as shown on that NOV,
explains when each item is applicable,
explains what action is required to satisfy the condition or requirement, and
references any additional information about the item in this handbook.

Reference: See Chapter 13, Exhibit 1, LAPP Lender’s Notice of Value.

NOV Item	Instructions for Preparing the NOV
Energy Conservation Improvements	Check this item for every property appraised as "existing construction." This action allows lenders to increase the loan amount for buyers to make energy efficiency improvements to the property. *Note: “Proposed” or “under construction” and “new construction” cases are not eligible for VA’s Energy Efficient Mortgage program. For more on Energy efficient improvements, see* Item 1 on the NOV or Section 7.03.
Wood Destroying Insect Information	Check the appropriate items if the property is located in an area where the probability of termite infestation is "very heavy" or "moderate to heavy" according to the Termite Infestation Probability Map published in The Council of American Building Officials (CABO) One and Two Family Dwelling Code. *Note:* If there is a question about the location of an infestation probability boundary line in relation to the subject property, contact the VA office of jurisdiction to determine if this requirement is applicable. *Additional Information* In cases processed as “New Construction,” the builder can meet the requirements for either “existing construction” or “proposed or under construction.” The pest control operator must meet all requirements of the State in which the property is located. In States which require the use of a State inspection form in all transactions, the State form is acceptable for VA loan guaranty purposes. Inspection reports are valid for VA purposes for 90 days from the date of inspection. *References:* See Section 12.06.
Lien Supported Assessment	Check the appropriate items and provide the required information, if applicable. Generally, this involves only units in a planned unit development or condominium. *References: Item 3* on the NOV Chapter 16, Section B.
Condominium Requirements	Check the appropriate items if the property is located in a condominium. *Important: The project must be acceptable to VA, and all project approval-related requirements satisfied, for the property to be eligible for VA loan guaranty. Reference*: See Chapter 16, Section A.
Water/Sewer System Acceptability	Check the appropriate items for a property served by an individual water supply, such as a well, or septic system in all cases appraised as “proposed or under” construction, and in “new” and “existing” construction cases in which there is an indication of a problem or the property is in an area known to have soil percolation problems. A spring or cistern water supply or pit privy may be acceptable in areas where they meet the standards of the locality and are properly constructed. Lenders should contact the VA office of jurisdiction regarding such cases. *References: Item 5* on the NOV Section 10.10 (“Required Exhibits”) Section 12.08. Section 14.02 (“Third Inspection”).
Connection to Public Water/Sewer	Check the appropriate items if the property is served by an individual well or septic system and there is an indication that public water or sewer is available. *References: Item 6* on the NOV Section 12.08.
Private Road/Common Use Driveway	Check this item if access to the property is by a private road or common-use driveway. *References:* Item 7 on the NOV Section 12.05.
Flood Insurance	Check this item if the dwelling is located in a Special Flood Hazard Area (SFHA). It is the lender's responsibility to assure that flood insurance is obtained and maintained on properties located in SFHAs, whether or not the appraiser correctly identifies the property as being in an SFHA. *Exceptions:* The property is not eligible as the security for a VA home, if the property is located in an SFHA and flood insurance is not available because the community is not participating in the National Flood Insurance Program (NFIP) The lender can appeal to the Federal Insurance Administration (FIA), if there is an indication that a property is incorrectly included in a SFHA. *Note:* Based on FIA's administrative review of the scientific or technical data submitted by the lender, FIA may issue a Letter of Map Amendment (LOMA) to amend the current FEMA map and establish that the property is not located in a SFHA. *References:* Item 8 on the NOV Section 9.10 Section 10.06 Chapter 11, Figure 1.
Airport Acknowledgment	Check this item if the property is located in an airport noise zone or safety-related zone acceptable to VA. *Reference:* Item 9 on the NOV Section 10.06 Chapter 11, Figure 1.
Repairs	Check the appropriate items and list the repairs recommended by the appraiser which are necessary to make the property meet VA Minimum Property Requirements (MPRs). *Lead-Paint Conditions* Since properties built prior to 1978 may contain lead-based paint, the correction of any defective paint condition on such properties must be made according to the requirements in Section 12.03 and inspected only by VA fee personnel or VA staff. *Notes: A notice of value should not be issued for a property in a badly deteriorated condition unless there is a reasonable likelihood that it can be repaired to meet VA MPRs prior to loan closing. A certification regarding the condition or adequacy of the roof, electrical/plumbing/heating systems, etc., should not be required unless there is an indication of a problem. Lenders and fee appraisers should use their own letterhead when certifying that required repairs have been satisfactorily completed. Generally, fee inspectors will not inspect repairs to existing properties, unless the loan involves alterations or improvements for which construction exhibits are required. Lender and purchaser disagreements with fee appraiser repair recommendations will be resolved by either: SAR contact with the fee appraiser (if the repair recommendations do not appear necessary per Section 11.09, for the property to meet MPRs). SAR must then provide in writing any changes made by the appraiser, or VA contact with SAR or fee appraiser (if initial lender/appraiser contact does not resolve the issue), or SAR and purchaser request VA to waive the repair item(s) in question, if necessary and* appropriate per Section 12.01 under “Exemptions”. *Reference:* Item 10 on the NOV Section 10.01 Section 10.05 Section 10.06 Section 11.04 Section 11.09 Chapter 12.
Local Housing/Planning Authority Code Requirements	Check this item if the property is existing construction which is located in an area where specific local housing/planning authority code requirements are enforced in conjunction with the sale of homes *Reference*: Item 11 on the NOV Section 10.07 Figure 1 in Chapter 11
“Not Inspected” Acknowledgement	Check the appropriate items if the property was appraised as “new construction”. *Note*: Item 12a on the NOV applies if the property is to be covered by a one-year builder’s warranty per Section 10.08. Item 12b on the NOV applies if the property is to be covered by a 10-year insured protection plan per Section 10.09. *Reference*: Item 12 on the NOV Section 10.05 Section 10.08 Chapter 10, Figure 1.
10-Year Insured Protection Plan	Check this item if the property was appraised as either “proposed or under construction” or “new construction” and is to be covered by a 10-year insured protection plan. *Note: A copy of the builder’s application to enroll the subject property in an acceptable 10-year plan is adequate “evidence of enrollment.” It is the builder’s responsibility to ensure that all enrollment fees are paid and the enrollment process is otherwise completed. Reference:* Item 13 on the NOV Section 10.05 Section 10.09 Chapter 14, Overview.
Energy Efficient Construction	Check this item if the property was appraised as “new construction.” The certification is required even when State or local energy-related requirements exceed the 1992 Council of American Building Officials (CABO) Model Energy Code (MEC) standard. The certification is not required if the dwelling is either manufactured home built to HUD code and inspected by HUD in the factory, or individual unit in a condominium over two stories high. *References: Item 14* of the NOV Section 12.02.
Lead/Water Distribution System	Check this item if the property was appraised as “new construction.” This requirement also applies to cases involving alterations, improvements or repairs to the potable water distribution system. *Reference: See Item 15* on the NOV.
Offsite Improvements	Check this item if the property was appraised as either “proposed or under construction” or “new construction” and off-site improvements have not been completed and accepted for maintenance by the local authority at that time, such as streets sidewalks drains, and/or sewers. *References: Item 16* on the NOV Section 9.09 Figure 1 in Chapter 10.
Proposed Construction	If the property was appraised as “proposed or under construction,” check this item and provide the information required to identify the construction exhibits used. *References: Item 17* on the NOV Section 10.10.
Construction Inspections	Check this item and identify the VA-assigned fee inspector if the property was appraised as “proposed or under construction.” *References: Item 18* on the NOV Section 10.04 Chapter 14.
Construction Warranty	Check this item if the property was appraised as either “proposed or under construction,” or “new construction” and the builder will provide a one-year VA builder’s warranty (instead of a ten-year insured protection plan). In both of the above situations, the veteran purchaser must be provided with a one-year builder’s warranty on VA Form 26-1859, Warranty of Completion of Construction, signed by an authorized official. See “NOV Item – Ten Year Insured Protection Plan” in this Section if the property will be covered by a ten-year protection plan. Use the following to determine how to handle cases involving manufactured homes classified as real estate.
	When cases ...	Then ...
	processed as “proposed or under construction” (See the definition in Section 10.10)	the contractor responsible for the construction of the foundation and other onsite features must provide the one-year warranty.
	involve a new manufactured home unit	the manufacturer must provide the purchaser with a one-year warranty on VA Form 26-8599, Manufactured Home Warranty. *Note:* This warranty will cover the manufactured home unit only.
	involve a used manufactured home sold by a dealer	the dealer must provide the purchaser with a six-month warranty on VA Form 26-8730, Used Manufactured Home Limited Warranty. This warranty that the mechanical equipment, electrical, gas and heating systems, and water and plumbing systems are in operating condition and the roof is weathertight. This warranty is not required in connection with the sale of a used manufactured home not involving a dealer.
	*References: Item 19* on the NOV Section 10.05 Section 10.08 Section 10.09 Section 10.10.
Other Conditions & Requirements	Check this item and list any other conditions or requirements necessary to satisfy fee appraiser or local VA office concerns, or otherwise cause the property to meet all VA requirements. *Example: If the dwelling will have a permanently installed, non-electric, non-vented fireplace or other non-vented space heater, the NOV must be conditioned to require the veteran purchaser’s written acknowledgement that the dwelling contains an non-vented fireplace or space heater which has not been inspected by VA, and a written heating/air conditioning contractor, that identifies the property and states that the non-vented appliance is equipped with an approved Oxygen Depletion Sensor, and meets local building authority requirements, or is installed according to the manufacturer’s recommendations if there are no local requirements. Consistency and Additional Conditions* VA offices are expected to be as consistent as practicable regarding NOV conditions and requirements. They will notify lenders in writing when a local situation dictates an additional condition/requirement not listed on the standard NOV.
SAR Signature	If...	...then...
	the NOV was issued through TAS	* the signature of the SAR is required on the NOV sent to the veteran, * however, no SAR signature is required on E-mailed copies to the veteran.
	the NOV was not issued through TAS	* the signature of the SAR is required on both the NOV sent to the veteran and the NOV sent to VA. * the SAR’s signature is also required on the SAR Certification which must be sent to VA with a copy of a reviewed appraisal and NOV.

13.07 Distributing Notices of Value

LAPP Cases

For cases processed under LAPP, the SAR must send the

veteran borrower the NOV and a copy of the reviewed appraisal report, within five business days of the lender’s earliest receipt of the appraisal report by the SAR or an authorized agent/broker.

Note: Any delay without documented, reasonable extenuating circumstances, such as the need to obtain additional information from the fee appraiser, will not be acceptable.

VA office of jurisdiction

a copy of the NOV, and
a complete set of the appraisal report contents (Section 11.04), either on the same day the NOV is sent to the veteran or by the last day of the month along with the other NOVs issued that month, and

fee inspector if assigned by VA, a copy of the NOV, if applicable

NOV Issued by VA

For VA processed cases, VA will send the

lender the original NOV or Master CRV and an original copy of the VA-reviewed appraisal report with all related exhibits, and
veteran borrower a copy of the NOV. If the borrower is unknown at the time the NOV is prepared, the copy will be

retained in the case file and mailed to him/her upon VA receipt of the Uniform Residential Loan Application (in “prior approval” cases), or
sent [ ] after the loan is guaranteed (for loans processed on the automatic basis).

Note: For properties valued on a Master CRV, the veteran borrower’s notice of value will be considered to be VA Form 26-1820, Report and Certification of Loan Disbursement or VA Form 26-1802a, HUD/VA Addendum to Uniform Residential Loan Application.

13.08 How Long Notice of Value is Valid

Existing or New Construction

A notice of value for property appraised as existing or new construction is valid for six months. Rapidly fluctuating real estate market conditions may temporarily dictate the use of a shorter validity period.

Proposed or Under Construction

A notice of value for a property appraised as proposed or under construction is valid for 12 months. Rapidly fluctuating real estate market conditions may temporarily dictate the use of a shorter validity period.

Veteran Under Contract

If a veteran signs a purchase agreement during a notice of value’s validity period, that notice of value will remain valid until that transaction is either completed or terminated.

Extension of Validity Period

VA will extend the validity period only when it is determined that current market conditions make it likely that the original value estimate will remain valid through the extended period.

Generally, extension requests will be sent to the VA office of jurisdiction, which will contact the fee appraiser involved, if appropriate, and issue an endorsement to the notice of value, if justified.

13.09 Requesting Changes to the NOV

Policy

After a notice of value is issued, the value estimate or any NOV condition or requirement may be changed if either

the change is clearly warranted and fully supported by real estate market or other valid information which would be considered adequate and reasonable by professional appraisal standards, or
the NOV’s issuance involved fraud, misrepresentation or substantial VA or LAPP lender administrative error and action is necessary to make the valuation consistent with the real estate market.

How to Request a Change

Any party of interest may request a change to a NOV. For documentation purposes, every such request must be in writing.

The change request should be submitted to the lender.

Submission of Real Estate Market Data

Although there is no requirement that comparable sales or other real estate market information be submitted with a request for a change in value, such supporting information will greatly assist in reviewing the request.

Note: A new VA appraisal must not be requested for any property which already has a valid NOV. However, an additional appraisal not assigned by VA can be used to support a request for an increase in value, provided the veteran purchaser was not required to pay any portion of the cost of that additional appraisal.

Processing Change of NOV Request

Upon receipt of a request to change a notice of value, the lender will either:

Process the request per Section 13.04 (“LAPP-Issuing NOV at Other Than Appraiser’s Value Estimate”) or Section 13.06 (“NOV Item – Repairs”), if applicable, or
Forward the request to the VA-assigned appraiser if it involves a request for increase in the value estimate of more than five percent but less than 10 percent or otherwise needs fee appraiser involvement, (i.e. repairs/condition waivers) or.
Forward the request to the VA office of jurisdiction if it involves a request for increase in the value estimate of 10 percent or more or if it involves matters regarding appraiser’s performance.

Appraiser’s Role

When a fee appraiser receives a request from a lender regarding a change in a notice of value, the fee appraiser will

record on the request the date that it was received (for VA timeliness calculation purposes)
review the request and any supporting documentation
prepare a written recommendation, with justification that would be considered adequate and reasonable by professional appraisal standards, and Note: In most cases, this will include a sales comparison analysis grid or similar analysis.
forward the recommendation and all related documentation to either the

lender, if the case is being processed under LAPP and an increase in value of not more than 5 percent is justified, or
VA office of jurisdiction, in all other cases.

Note: The appraiser may charge a reasonable fee (not to exceed that allowed by VA) if the market data necessary to reconsider the value estimate was not available at the time of the appraisal.

VA’s Role

Upon receipt of either a request from a lender to change a notice of value or a fee appraiser’s recommendation regarding a change to a notice of value, VA staff will:

review the material received,
contact the fee appraiser, if necessary, and otherwise determine if the requested change is justified, and
notify the lender of VA’s decision.

Lender’s Role

For cases processed under LAPP, an amended NOV will be issued in TAS and provided to the veteran purchaser,

upon reconsideration by the SAR of additional data justifying an increase in value, of not greater than five percent, or
upon receipt of a fee appraiser’s justified recommendation for an increase in value, of not greater than five percent, or
upon receipt of the VA letter authorizing an increase in value or other changes to the NOV.

Documentation concerning the change is to be retained for future VA reference. The amended NOV will replace the original NOV which will not be retained.

13.10 Transfer of Appraiser’s Reports Between Lenders

Lender Cooperation

Lenders are expected to cooperate on a reciprocal basis when a veteran purchaser chooses to have his/her mortgage transaction completed by a lender other than the one who ordered the appraisal.

LAPP Cases

A LAPP notice of value is not transferable to another lender. However, an appraisal report requested by one lender can be subsequently used by a LAPP lender, if the LAPP lender assumes full responsibility for LAPP processing by performing a complete review of the appraisal report and issuing, on its own letterhead, a notice of value to the veteran borrower.

Other Cases

If the subsequent lender does not have LAPP authority and no VA Form 26-1843, Certificate of Reasonable Value, was ever issued by VA staff, then all appraisal documentation must be submitted to VA. VA staff will review that material and issue a VA Form 26-1843 to the subsequent lender.

A notice of value issued by VA staff on VA Form 26-1843 can be transferred to a subsequent lender.

If Unable to Obtain Appraisal

If a subsequent lender is unable to obtain an original copy of a needed appraisal report and all addenda, including clear copies of all pictures, that lender may contact the fee appraiser involved for that documentation. The fee appraiser may negotiate a reasonable fee, to be paid by the lender or veteran, for any additional work that may be necessary.

Validity Period Issues

For information on validity period issues, see Section 13.08.

13.11 Discovery of Title Limitations & Conditions

Requirement to Notify VA

Any title limitation or condition discovered after examination of the title but prior to loan closing must be submitted to the VA office of jurisdiction (along with a copy of the appraisal report in LAPP cases), unless it

was considered in the appraisal report, or
is listed in 38 CFR 36.4350 as not materially affecting the reasonable value of residential property.

[38 CFR 36.4350]

If VA Value Based on HUD Appraisal

If the VA notice of value was based on a HUD value determination per Chapter 10.11, and neither of the above two exclusions apply, the lender must

contact HUD to determine what effect, if any, the limitation or condition has on the value of the property, and
provide the VA office of jurisdiction with the results so that office can issue a VA Form 26-6363, Endorsement to Certificate of Reasonable Value.

Limitations and Conditions Not Affecting Value

Per, the following conditions or limitations to title have been determined by VA as not materially affecting the VA value estimate of residential property (whether or not enforceable by a reverter clause), provided there has been no breach of the conditions affording a right to an exercise of the reverter clause.

[38 CFR 36.4350]

When the limitation or condition is …	There is no material effect on the VA value estimate if …
Building or use Restriction	no violation exists, and the proposed use by the veteran is not likely to result in a violation.
Violation of Building or Use Restrictions of Record	they have existed for more than one year, are not the subject of pending or threatened litigation, and do not provide for a reversion or termination of title, condemnation by municipal authorities, or a lien for liquidated damages which may be superior to the lien of the guaranteed or insured mortgage.
Easement	public utility/drainage easement along one or more of the property lines or easement for drainage or irrigation ditches, provided the exercise of the rights of such easement does not interfere with the use of any of the buildings or improvements located on the subject property mutual easement for joint driveway located partly on the subject property and partly on adjoining property, provided the agreement is recorded in public records, or easement for underground conduits which are in place and which do not extend under any buildings on the subject property.
Encroachment	encroachment on the subject property by improvement on the adjoining property when such encroachment does not exceed one foot within the subject boundaries, provided such encroachment does not touch any buildings or interfere with the use or enjoyment of any building or improvement on the subject property encroachment by hedges or removable fences belonging to subject or adjoining property encroachment not exceeding one foot on adjoining property by driveway belonging to subject property, provided there exists a clearance of at least eight feet between the buildings on the subject property and the property line affected by the encroachment, or lot line variation between the length of the subject property lines as shown on the plot plan or other exhibits submitted to VA and as shown by the record or possession lines, provided such variation does not interfere with the current use of any of the improvements on the subject property and does not involve a deficiency of more than two percent with respect to the length of the front line, or more than five percent with respect to the length of any other line.

VA Processing of Limitations/Conditions Affecting Value

For limitations/conditions submitted to VA which were not considered in the appraisal report or covered by 38 CFR 36.4350, the VA office of jurisdiction will

contact the fee appraiser (via VA Form Letter 26-209) if additional information is needed to determine the effect of the limitation/condition on the value estimate
consider the impact of the condition/limitation on the reasonable value of the property, and
notify the lender or other interested party of its determination via either VA Form Letter 26-210 or an endorsement (containing the language found on FL 26-210) to the request for VA consideration of the condition/limitation.

[38 CFR 36.4350]

13.12 Effect of Major Disasters on Notices of Value

VA Notice to Program Participants

As soon as practicable after a major natural disaster, VA offices in the area(s) affected by the disaster will send their program participants instructions regarding the handling of cases in which a notice of value is outstanding.

Exhibit 1—LAPP Lender’s Notice of Value

[on lender's letterhead]

LENDER'S NOTICE OF VALUE

[date of notice]	LENDER LOAN NO.:		VA CASE NO.:
		APPRAISAL REVIEWER: [SAR name, SAR id #]
[Mr. and/or Ms.] [purchaser's name and current mailing address]		PROPERTY ADDRESS: [complete address]

Dear [Mr. and/or Ms.] [purchaser's last name]:

The above property has been appraised by a fee appraiser assigned by the VA regional office in [city and state]. On [date], our VA-authorized appraisal reviewer personally reviewed the fee appraiser's report and determined the property's estimated reasonable value to be $[amount]. The maximum repayment period for a loan to purchase this property is [fee appraiser's "economic life" estimate or 30, whichever is less] years.

The VA appraisal was made to determine the reasonable value of the property for loan purposes. It must not be considered a building inspection. Neither VA nor the lender can guarantee that the home will be satisfactory to you in all respects or that all equipment will operate properly. A thorough inspection of the property by you or a reputable inspection firm may help minimize any problems that could arise after loan closing. In an existing home, particular attention should be given to plumbing, heating, electrical and roofing components.

REMEMBER: VA GUARANTEES THE LOAN, NOT THE CONDITION OF THE PROPERTY.

THE CONDITIONS/REQUIREMENTS CHECKED BELOW APPLY TO THIS PROPERTY:

_____	1. ENERGY CONSERVATION IMPROVEMENTS. You may wish to contact the utility company or a reputable firm for a home energy audit to identify needed energy efficiency improvements to this previously occupied property. Lenders may increase the loan amount to allow buyers to make energy efficiency improvements such as: Solar or conventional heating/cooling systems, water heaters, insulation, weather-stripping/caulking and storm windows/doors. Other energy-related improvements may also be considered. The mortgage may be increased by up to $3,000 based solely on documented costs; or up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs; or more than $6,000 subject to a value determination by VA.
_____	2. WOOD-DESTROYING INSECT INFORMATION
_____	a. Inspection Report (Existing Construction). The property must be inspected at no cost to you by a qualified pest control operator using Form NPCA-1, or other form acceptable to VA. Any reported infestation or structural damage affecting the value of the property must be corrected to VA's satisfaction prior to loan settlement. You must acknowledge receipt of a copy of the inspection report in the space provided on the form.
_____	b. Soil Treatment Guarantee (Proposed or Under Construction). A properly completed Form NPCA-99a is required. If the soil is treated with a termiticide, a properly completed Form NPCA-99b is also required. The lender will provide you with a copy.
_____	3. LIEN-SUPPORTED ASSESSMENT. This property is located in a development with mandatory membership in a homeowners' association. The lender is responsible for ensuring that title meets VA requirements for such property and that homeowner association assessments are subordinate to the VA-guaranteed mortgage.
_____	a. Homeowner Association Fee. Estimated fee of $[amount] per [period of time].
_____	b. Other. __________________________________________
_____	4. CONDOMINIUM REQUIREMENTS. The lender is responsible for ensuring that this condominium is acceptable to VA and that any condominium-related special conditions or requirements have been met. There may be additional information in "Other Conditions/Requirements" below.
_____	5. WATER/SEWAGE SYSTEM ACCEPTABILITY. Evidence from the local health authority or other source authorized by VA that the individual _____ water supply, _____ sewage disposal system(s) is/are acceptable.
_____	6. CONNECTION TO PUBLIC WATER/SEWER. Evidence of connection to _____ public water, _____ public sewer, if available, and that all related costs have been paid in full.
_____	7. PRIVATE ROAD/COMMON-USE DRIVEWAY. Evidence that use of the private road or common-use driveway is protected by a recorded permanent easement or recorded right-of-way from the property to a public road, and that a provision exists for its continued maintenance.
_____	8. FLOOD INSURANCE. Since improvements on this property are located in a FEMA Special Flood Hazard Area, flood insurance is required.
_____	9. "AIRPORT" ACKNOWLEDGMENT. Your written acknowledgment that you are aware that this property is located near an airport and that aircraft noise may affect the livability, value and marketability of the property.
_____	10. REPAIRS. The _____ lender _____ fee appraiser (_________[name]__________) _____ fee compliance inspector(_________[name]__________) is to certify that the following repairs have been satisfactorily completed. See the above second paragraph about your responsibility concerning the condition of the property.
	[List repairs recommended by fee appraiser which are necessary to make the property meet VA minimum property requirements for existing construction. Inspections/certifications should not be required unless there is an indication of a potential problem.]
_____	11. LOCAL HOUSING/PLANNING AUTHORITY CODE REQUIREMENTS. Evidence that local housing or planning authority code requirements, if any, have been met.
_____	12. "NOT INSPECTED" ACKNOWLEDGMENT. Your written Acknowledgment that, you are aware that since this new property was not inspected during construction by VA,
_____	a. VA assistance with construction complaints will be limited to defects in equipment, material and workmanship reported during the one-year builder's warranty period.
_____	b. VA will not intercede on your behalf in the processing of any construction complaints.
_____	13. TEN-YEAR INSURED PROTECTION PLAN. Evidence of enrollment of this new property in a 10-year insured protection plan acceptable to the Department of Housing and Urban Development (HUD).
_____	14. ENERGY-EFFICIENT CONSTRUCTION. Builder's certification which identifies this new dwelling and states that it was constructed to meet the energy conservation standards of the Council of American Building Officials (CABO) 1992 Model Energy Code (MEC).
_____	15. LEAD/WATER DISTRIBUTION SYSTEM. Builder's certification which identifies this new dwelling and states that the solders and flux used in construction did not contain more than 0.2 percent lead and that the pipes and pipe fittings used did not contain more than 8.0 percent lead.
_____	16. OFF-SITE IMPROVEMENTS. Evidence that the streets, sidewalks, drains, water, sewer, etc., have been completed and accepted for maintenance by the local authority.
_____	17. PROPOSED CONSTRUCTION. To be completed based on construction exhibits identified as ____[model name; or type of construction, square footage, # rooms, # bedrooms and # bathrooms]______
_____	18. CONSTRUCTION INSPECTIONS. By VA fee compliance inspector (_________[name]__________) or HUD fee inspector (with prior VA approval). _____ Only a final inspection is required if local building authority inspections are acceptable to VA, or if builder to provide you with a ten-year insured protection plan acceptable to HUD.
_____	19. CONSTRUCTION WARRANTY. One-year VA builder's warranty on a fully completed VA Form 26-1859, Warranty of Completion of Construction.
_____	20. OTHER CONDITIONS/REQUIREMENTS __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________

Sincerely,

[signature, name and title of person authorized to sign notice]

ACES IQ Reference Materials

Chapter 13: Value Notices

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