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VA Escape Clause
- Thread starter 1963Clipper
- Start date
- Status
Hondo
Junior Member
- Joined
- Jul 29, 2007
- Professional Status
- Certified Residential Appraiser
- State
- Virginia
This is from the Roanoke RLC June 7, 2019:
Chapter 10
The appraisers must also analyze the contract to ensure that a VA-mandated “Escape Clause” is contained within the contract. This must be boldly and clearly addressed in the appraisal report for the SAR to validate.
Prompt Scheduling of Appointment - Appraisers must make contact to schedule an appointment within two business days of receiving an assignment, documenting the activity in WebLGY to help ensure that a mutually convenient appointment is scheduled and the appraisal is completed on time.
Property to be Improved - A property to be altered, improved or repaired is eligible for an appraisal with the appraisal prepared “subject to” the satisfactory completion of the work. The appraiser must be provided with construction exhibits, or depending on the nature of the work involved, documentation clearly describing the full extent of all work to be completed. The appraiser will provide an “as repaired” value. Any work that must be inspected upon completion must be approved by the local building authority.
Construction Exhibits - Construction exhibits must be uploaded by the lender into WebLGY the same day the case number is assigned.
Inspection by an Appraiser Following Construction - On proposed construction cases, in addition to any local building authority inspections, the lender must have the VA-assigned fee appraiser visit the property and certify that construction substantially complies with the certified construction exhibits upon which the appraisal was based and that the improvements comply with any conditions of the sales contract (for example, landscaping, decking, or fencing).
Chapter 11
****The VA assigned fee appraiser’s signature must be provided in the signature block with the fee appraiser’s VA ID in the “other” block, just below state certification and license information
Comments Explaining Adjustments - The appraiser should provide comments when adjustments are made for points of comparison that are not self-explanatory or when large adjustments are made. Providing detailed commentary about the market and comparable selection may reduce the number of requests for revisions of appraisals.
Recommend Repairs, Not Inspections - When an appraiser observes an item that does not meet VA MPRs, the appraiser must recommend a repair, not an inspection
Only the VA-assigned fee appraiser may sign the appraisal report
Chapter 12
Recommend Repairs, Not Inspections - Appraisers must not prepare appraisals subject to inspections. The appraiser must recommend repairs, not inspections, for any conditions that do not appear to meet MPRs.
Cosmetic Items - The appraiser should not recommend repairs of cosmetic items, items involving minor deferred maintenance or normal wear and tear, or items that are inconsequential in relation to the overall condition of the property. While minor repairs should not be recommended, the appraiser should consider these items in the overall condition rating when estimating the market value of the property.
Repairs Required by a Local Authority - If the appraiser is aware of any repairs that will be required due to local code enforcement, for example, the removal of unpermitted improvements, the appraiser must prepare the appraisal subject to these repairs.
Appraiser Responsibility - While the appraiser is not required to test the operation of any mechanical systems, the appraiser should recommend the completion of any repairs that are readily apparent.
No Value to Leased Equipment - The appraiser must not include the value of any leased mechanical systems or any other leased equipment in the estimated market value as leased items are not suitable security for a loan. This includes but is not limited to fuel or propane storage tanks, solar or wind systems (including power purchase agreements), and other
Leased Equipment to be Noted in the Appraisal - The appraiser must identify leased items in the appraisal report. Some leases may encumber the title making the property less than fee simple. The appraiser must consider any detrimental effect on the value of the property if the leased items are removed by the lessor.
Chapter 10
The appraisers must also analyze the contract to ensure that a VA-mandated “Escape Clause” is contained within the contract. This must be boldly and clearly addressed in the appraisal report for the SAR to validate.
Prompt Scheduling of Appointment - Appraisers must make contact to schedule an appointment within two business days of receiving an assignment, documenting the activity in WebLGY to help ensure that a mutually convenient appointment is scheduled and the appraisal is completed on time.
Property to be Improved - A property to be altered, improved or repaired is eligible for an appraisal with the appraisal prepared “subject to” the satisfactory completion of the work. The appraiser must be provided with construction exhibits, or depending on the nature of the work involved, documentation clearly describing the full extent of all work to be completed. The appraiser will provide an “as repaired” value. Any work that must be inspected upon completion must be approved by the local building authority.
Construction Exhibits - Construction exhibits must be uploaded by the lender into WebLGY the same day the case number is assigned.
Inspection by an Appraiser Following Construction - On proposed construction cases, in addition to any local building authority inspections, the lender must have the VA-assigned fee appraiser visit the property and certify that construction substantially complies with the certified construction exhibits upon which the appraisal was based and that the improvements comply with any conditions of the sales contract (for example, landscaping, decking, or fencing).
Chapter 11
****The VA assigned fee appraiser’s signature must be provided in the signature block with the fee appraiser’s VA ID in the “other” block, just below state certification and license information
Comments Explaining Adjustments - The appraiser should provide comments when adjustments are made for points of comparison that are not self-explanatory or when large adjustments are made. Providing detailed commentary about the market and comparable selection may reduce the number of requests for revisions of appraisals.
Recommend Repairs, Not Inspections - When an appraiser observes an item that does not meet VA MPRs, the appraiser must recommend a repair, not an inspection
Only the VA-assigned fee appraiser may sign the appraisal report
Chapter 12
Recommend Repairs, Not Inspections - Appraisers must not prepare appraisals subject to inspections. The appraiser must recommend repairs, not inspections, for any conditions that do not appear to meet MPRs.
Cosmetic Items - The appraiser should not recommend repairs of cosmetic items, items involving minor deferred maintenance or normal wear and tear, or items that are inconsequential in relation to the overall condition of the property. While minor repairs should not be recommended, the appraiser should consider these items in the overall condition rating when estimating the market value of the property.
Repairs Required by a Local Authority - If the appraiser is aware of any repairs that will be required due to local code enforcement, for example, the removal of unpermitted improvements, the appraiser must prepare the appraisal subject to these repairs.
Appraiser Responsibility - While the appraiser is not required to test the operation of any mechanical systems, the appraiser should recommend the completion of any repairs that are readily apparent.
No Value to Leased Equipment - The appraiser must not include the value of any leased mechanical systems or any other leased equipment in the estimated market value as leased items are not suitable security for a loan. This includes but is not limited to fuel or propane storage tanks, solar or wind systems (including power purchase agreements), and other
Leased Equipment to be Noted in the Appraisal - The appraiser must identify leased items in the appraisal report. Some leases may encumber the title making the property less than fee simple. The appraiser must consider any detrimental effect on the value of the property if the leased items are removed by the lessor.
jay trotta
Elite Member
- Joined
- Feb 8, 2004
- Professional Status
- Certified Residential Appraiser
- State
- Connecticut
Comments Explaining Adjustments - The appraiser should provide comments when adjustments are made for points of comparison that are not self-explanatory or when large adjustments are made.
thinking, still thinking, hmmm
Any other thoughts.....??
thinking, still thinking, hmmm
Any other thoughts.....??
David Beasley
Senior Member
- Joined
- Dec 12, 2003
- Professional Status
- Certified Residential Appraiser
- State
- North Carolina
The VA portion of the FHA/VA Financing Addendum is what the VA is calling the "escape clause" so far as I know. I've cited that addendum (in about 99.9% of our VA contracts here for years) as containing the clause since this all started and no one has come back and told me how wrong I was. Yet. But it's real estate appraising. It's VA real estate appraising. Give it time, they'll find something wrong with it eventually...
Funny though, only 1 company routinely asked for it until I got fully into the habit and was making the statement in all my finished reports. No one else seemed to care.
Tim Hicks (Texas)
Elite Member
- Joined
- Jan 15, 2002
- Professional Status
- Certified Residential Appraiser
- State
- Texas
They actually have an escape clause addendum they want included outside for Third Party Financing Addendum that practically states the same thing. See the attachment above. I am batting 20% for the past two weeks regarding having the escape clause provided with the contract. I do know real estate agents are supposed to know about it as my daughter who is a real estate agent told me they had a bulletin about it. I have yet to see a new home construction contract with anything of the sort.
CindyR
Senior Member
- Joined
- Oct 26, 2003
- Professional Status
- Certified Residential Appraiser
- State
- Arizona
well i thought i would go read the new chapter 10 just in case there was something else interesting in there. but the current pamphlet 26-7 i found shows the same revision date but no mention of the escape clause. i don't understand this...
Mike Garrett RAA
Elite Member
- Joined
- Jan 14, 2002
- Professional Status
- Certified Residential Appraiser
- State
- Colorado
Our state approved forms all contain the escape clause. Where we need to be careful is new construction. Some of the contracts used by builders do not have it. The other major change was having our VA ID# included in the signature section. Otherwise, not much different
jimk1709
Freshman Member
- Joined
- Aug 2, 2008
- Professional Status
- Certified Residential Appraiser
- State
- Arizona
The copy I have includes 2 more sentences under Item "B" addressing the escape clause. Talked to the Arizona RLC today and they indicated we must address (in bold) if the escape clause was included or not. At first I thought the clause had to be included in the contract however the RLC told me just to address if it was or not included.
Peter LeQuire
Elite Member
- Joined
- Jan 3, 2005
- Professional Status
- Retired Appraiser
- State
- Tennessee
The FHA/VA "escape clause", so-called, has been mandatory language in purchase transactions involving FHA or VA loans for decades. It gives prospective buyers requiring such financing the ability to walk away from a transaction if the appraisal does not meet or exceed the sales price in the contract. It's been mandatory since before 1970, when I first went to work for a mortgage company.
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